Diversify Export Earnings, Increase FDIs To Address Fx Liquidity Challenge -Uwaleke

MPC Postponement, Blessing In Disguise – Uwaleke

Professor of Finance and Capital Market, Uche Uwaleke, has said that except the Federal Government diversify its export base and increased foreign direct investments (FDIs), the liquidity challenge in the forex market would persist. Uwaleke, who gave the advice Monday in Abuja, added that the country’s weak economic indices would make it difficult for the government to implement the naira float.  In a bid to address the widening exchange rate gap, the federal government resorted to a managed float of the naira on the I&E Window. However, this policy has failed to halt the fall of the naira.  The exchange rate for a dollar to naira at the official window is N751.1 as of Monday, 11 September 2023, according to the data published by CBN. While at the parallel market, the naira exchanged for N925 to a dollar in Lagos. Experts have said that with a larger part of Nigeria’s revenue still coming from oil, it would not be easy for the government to address supply side constraints in the FX due to the country’s inability to meet it’s OPEC quota. “The only sustainable solution to deal with the liquidity challenge in the forex market is to have multiple streams of forex comprising export proceeds and foreign investments. “Nigeria’s economy is not ready for a complete float of the naira due to weak economic fundamentals. “Regrettably, over 90% of forex inflows still come from crude oil sales. A diversified export base is required to check volatility in a forex market where the exchange rate is determined by market forces. This is still lacking in Nigeria. “On the demand side, I support the idea of curbing dangerous currency speculation by making the trading in forex outside the Banks and BDCs illegal. By doing so, the CBN can be in a position to monitor activities in the forex market,” he said. 

NNPC secures $3bn loan from AFRIEXIM Bank to boost FX market, bolster naira

HEDA writes NNPCL, seeks clarity on $3bn naira stabilisation loan 

In a significant move, the Nigerian National Petroleum Corporation Limited (NNPCL) has entered into a substantial crude repayment loan agreement amounting to $3 billion with the esteemed AFRIEXIM Bank. This financial endeavor is set to play a pivotal role in the stabilization of the foreign exchange market and the support of the Nigerian currency, the naira. The NNPC Ltd., in collaboration with AfriEXIM bank, has formalized their commitment through the signing of a letter of commitment and a Termsheet for a crucial $3 billion crude oil repayment loan. This momentous event unfolded at the headquarters of the bank, situated in Cairo, Egypt. The loan’s provisions encompass immediate disbursement, thereby empowering NNPC Ltd. with the resources necessary to provide substantial backing to the Federal Government’s ongoing fiscal and monetary policy reforms. These reforms are meticulously crafted to achieve a fundamental goal: the stabilization of the exchange rate market. By securing this substantial loan, NNPC Ltd. has taken a substantial step towards reinforcing the Nigerian economy. A statement from the company on Wednesday read: “The NNPC Ltd. and AfriEXIM bank have jointly signed a commitment letter and Termsheet for an emergency $3 billion crude oil repayment loan. “The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd. to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.”