The federal government has devised a strategy to securitize dividends of approximately $7 billion from the Nigerian Liquefied Natural Gas (NLNG). An official at NLNG revealed this on Thursday, October 26.
According to the source, the Tinubu-led administration expects to receive the $7 billion through a consortium led by Standard Chartered Bank in the upcoming week.
Additionally, the federal government foresees receiving funds from a $3 billion emergency loan obtained by the Nigerian National Petroleum Company Limited (NNPCL) from the African Export-Import Bank (Afreximbank) on August 16.
The total expected inflow in the short term is $10 billion. The Federal Ministry of Finance Incorporated, which holds shares in the NLNG, is responsible for organizing and executing this plan.
This initiative aligns with the recent announcement by the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, who stated that the country is poised to receive approximately $10 billion in the near future.
These funds are anticipated to have a significant impact on addressing the foreign exchange (FX) backlog and contributing to the stabilization of the national currency, the naira.
Quoting a source from NLNG, Thisday reported:
“NLNG has been performing and used to pay dividends of about $6 billion, but because our oil production and gas production have fallen, dividends also fell to about $2 billion.
But what this government has decided to do is to securitize these dividends over a period and use it to borrow money to curb the depreciation of the naira against the dollar.
“The target is to boost dollar liquidity by flooding the market with dollar supply and try to push the naira/dollar exchange rate to about N800/$. So, by next week, they may get $7 billion from the Standard Chartered Bank consortium and get the $3 billion from Afreximbank, under the agreement reached with NNPCL.
“At the same time, the government is making serious efforts to ramp up oil production significantly.
The idea is to use the entire $7 billion to settle some old FX forward obligations and reduce pressure on the naira, improve liquidity, and allow the currency to appreciate.
What you should be aware of:
The Federal Government aims to increase oil production through two primary objectives: ensuring security in the oil-producing regions of the Niger Delta, where crude oil theft has become rampant, and implementing development initiatives in the Niger Delta.
Once these objectives are achieved, it is expected to attract more private sector investments into the oil sector.
Earlier today, the naira witnessed a substantial increase in value, strengthening by N166 against the U.S. dollar in the Peer-to-Peer (P2P) market.
This shift in the exchange rate reflects changes in strategies employed by currency traders.
However, on Thursday evening, the naira reached a peak exchange rate of N1279 to the U.S. dollar. But by Friday morning, it had stabilized at N1113 per dollar.
Market insights suggest that the rise in the naira’s value may be due to a lack of buyers willing to transact at the higher rate of around N1300 per dollar.
Some individuals are holding back from purchasing at this rate, anticipating a potential strengthening of the local currency.
