By Yemi Olakitan
A scheme to securitize dividends from Nigerian LNG, which amounts to about $7 billion, has been developed by the federal government.
According to reports, this information was disclosed on Thursday, October 26 by an NLNG official.
According to the source, the Tinubu-led administration plans to get the $7 billion next week via a group headed by Standard Chartered Bank.
Furthermore, on August 16, the African Export-Import Bank (Afreximbank) will release a $3 billion emergency loan that the Nigerian National Petroleum Company Limited (NNPCL) secured.
This combined influx of $10 billion is anticipated in the near future. With shares in the NLNG, the Federal Ministry of Finance Incorporated is in charge of organising and carrying out this strategy.
This programme is in line with the recent declaration made by Mr. Wale Edun, the Coordinating Minister of the Economy and Minister of Finance, that the nation will shortly receive almost $10 billion.
These monies are anticipated to be extremely important in clearing the foreign exchange (FX) backlog and helping to keep the naira, the country’s currency, stable.
“NLNG has been operating and was previously paying out over $6 billion in dividends; but, due to a decline in our production of gas and oil, dividends have also decreased to roughly $2 billion. To stop the naira’s decline versus the dollar, the government has chosen to securitize these dividends over time and utilise the proceeds to finance borrowing.
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By saturating the market with dollars, the goal is to increase dollar liquidity and attempt to drive the naira/dollar exchange rate to roughly N800/$.
According to the deal signed with NNPCL, they may therefore get $7 billion from the Standard Chartered Bank consortium by next week and the $3 billion from Afreximbank.
The administration is working hard to greatly increase oil production at the same time. The entire $7 billion is intended to settle some outstanding FX forward obligations, ease pressure on the naira, increase liquidity, and permit currency appreciation.
Things to be aware about
The two main goals of the Federal Government’s intentions to boost oil output are development projects in the Niger Delta and maintaining security in the oil-producing regions of the Niger Delta, where theft of crude oil has grown rampant.
When these objectives are met, the private sector’s investments in the oil industry will rise.
The value of the naira significantly increased earlier today in the Peer-to-Peer (P2P) market, where it strengthened by N166 versus the US dollar.
This change in the exchange rate is indicative of a shift in the trading techniques used by currency dealers.
On Thursday night, however, the naira’s peak exchange rate to the US dollar was N1279. But it had settled at N1113 per dollar by Friday morning.
Market insights suggest that the reason for this increase in the value of the naira could be that there aren’t enough buyers prepared to exchange at the higher rate of about N1300 per dollar.
