BUSINESS DAY
The naira is in free fall once again after a $3 billion loan secured by state-oil company NNPCL that was supposed to inject much-needed dollar liquidity into the foreign exchange market appears to be stalling.
After exchanging for N850 per USD, up from N910/$ in street trading within two days of the NNPCL’s announcing the loan deal on August 16, the naira exchanged for a new-low of N920 per USD Wednesday August 29, according to data obtained from multiple street traders.
Sources familiar with the $3 billion loan deal say it’s now on ice after investors who were supposed to make up the balance of the syndicated loan have now got cold feet, leaving only the African Export-Import (Afrexim) bank which can not single-handedly provide all the cash.
The reason for the sudden change of heart has been linked to the country’s worsening finances and apparent desperation to defend the naira.
“Afrexim bank has too much exposure to Nigeria and has reached its single obligor limit & can’t do it alone,” a source familiar with the deal told BusinessDay.
“NNPC is too big a risk so Afrexim bank can’t close the deal without some other investors,” said another source familiar with the deal but not allowed to speak publicly.
It has been two weeks since the deal was first announced and the market has run out of waiting time. There has been zero accretion to the country’s external reserves since then and most importantly, the CBN’s dollar supply remains thin.
Uncertainty over CBN governor undermines reforms
While the loan deal drags, the naira is taking a beating with the situation threatening to get worse as Nigeria muddles through without a substantive CBN governor to calm the storm.
Some investors, who see the lack of a substantive CBN governor as a more pressing problem for the naira than the stalling $3 billion loan deal, say Nigeria needs a CBN governor who will waste no time in articulating a new strategy for fx management in the country especially after the bold move to “liberalize” the market in June.
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