How Afreximbank, UBA & Partners Are Helping Nigeria Out Of FX Liquidity Problem

Analysts are applauding how the African Export-Import Bank (Afreximbank), United Bank for Africa (UBA), the NNPC Limited and other partners have combined efforts to help out with the nation’s shortage of foreign exchange liquidity.

The information available revealed that Afreximbank and UBA closed a $3.3 billion liquidity support for Nigeria through a structured financing arrangement with NNPC Limited on December 29, 2023.

Added information sourced from a report on Thisday has it that $2.25 billion out of the $3.3 billion foreign exchange (FX) support facility – the first tranche – has been released to relieve the nation’s troubling FX Liquidity status.

Afreximbank is acting as the Mandated Lead Arranger along with United Bank for Africa (UBA) as the Local Arranger in the deal that aligns with the Renewed Hope Agenda of President Bola Ahmed Tinubu’s commitment to stabilize the FX market.

The economy booster, with the balance expected to be paid in January 2024, is also aiding the battle against inflation taken headlong by President Tinubu since he took office on May 29, 2023.

UBA is also acting as the Onshore Depository Bank for the transaction that also involves Sahara Energy and Gunvor according to the report monitored on Thisday.

 “We have a budget deficit, which can only be funded by borrowing or selling government assets or both.

“The other fundamentals that could increase our revenue base have been stretched ambitiously. 

“This gives the government no other option but to continue to borrow.” Chijioke Ekechukwu, the Managing Director, Dignity Finanace and Investment Limited told Thisday in making his position known about the deal.

He, however, observed that “Although the $2.25 billion loan will bring FX respite in the short run, it is not likely to sustain the FX market for more than one month. 

“So, we expect the exchange rate to drop marginally with such injections, speculations, and other uses will, however, quickly drain the market of the available FX.”

 Airing his thought, Uche Uwaleke – the Chairman, Chartered Institute of Bankers of Nigeria (CIBN), Abuja Branch – asserted that any forex inflow is welcome given the dire situation of things.

He insisted that  “It’s a case of half bread is better than none.”

Adding his voice to the gains in the much-needed inflow of forex,  Idakolo Gbolade – the Chief Executive, SD&D Capital Management Limited pointed out to Thisday that “the Afreximbank loan would ease the pressure on the naira in the interim while other robust measures to be taken to increase FX revenue in the coming months will further help the resolve of FX change the country is facing.”