Naira crashes massively against dollar at black market
The Nigerian naira is experiencing a significant decline once again, as a highly anticipated $3 billion loan, intended to inject much-needed foreign exchange liquidity into the market, faces setbacks, causing alarm in the financial sector.
Following the announcement of the loan deal by the state-owned oil company, Nigerian National Petroleum Corporation (NNPC), the naira strengthened to N850 per USD from N910 per USD in street trading within a mere two days. However, the naira’s value plummeted to a new low of N920 per USD on Wednesday, August 29, as the loan deal showed signs of stalling.
Insiders with knowledge of the situation indicate that the loan deal has encountered difficulties due to investor hesitancy. The investors who were initially supposed to contribute to the syndicated loan have reportedly backed out, leaving only the African Export-Import (Afrexim) Bank as a potential participant. However, Afrexim Bank cannot solely provide the required funds, partly due to its substantial exposure to Nigeria……………………………………………….CONTINUE READING
“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 situation disclosed to BusinessDay. Another source highlighted that the Nigerian National Petroleum Corporation (NNPC) presents a significant risk, contributing to the reluctance of investors to engage in the deal.
While the loan deal remains in limbo, the Nigerian naira continues to face depreciation, raising concerns about the absence of a substantive governor at the Central Bank of Nigeria (CBN). Investors view the leadership vacuum at the CBN as a more pressing issue for the naira’s stability than the delayed $3 billion loan. They emphasize the need for a swift appointment of a CBN governor who can promptly outline a new foreign exchange management strategy, particularly following the market “liberalization” move made in June.
As the market runs out of patience, Nigeria’s external reserves remain stagnant, and the Central Bank’s dollar supply remains limited, contributing to the uncertainty surrounding the naira’s trajectory. The combination of a stalled loan deal and the lack of strong leadership at the CBN has created a challenging economic environment, prompting calls for swift action to restore stability and confidence in the currency.
