The Nigerian Naira gained against the dollar on Thursday, 4th January 2024 at the official market to record the first gain in the new year 2024.
Market watchers expected that a $2.25 billion injection from the African Export-Import Bank (Afreximbank) to ease the country’s forex crunch will have a positive impact on the local currency.
The facility was intended to address the acute liquidity shortage in the FX market, since the unification of the FX market by the Central Bank of Nigeria (CBN) on June 14, 2023.
The domestic currency appreciated 13.51% to close at N895.23 to a dollar at the close of business, data from the NAFEM where forex is officially traded, showed.
- This represents an N139.89 gain or a 13.51% increase in the local currency compared to the N1035.12 closed on the previous day.
- The intraday high recorded was N1268/$1, while the intraday low was N701/$1, representing a wide spread of N567/$1.
- According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $68.49 million, representing a 20.06% decrease compared to the previous day.
However, the naira dropped marginally at the parallel forex market where forex is sold unofficially, the exchange rate quoted at N1230/$1, representing a 0.81% decline over what it closed the previous day, while peer-to-peer traders quoted around N1240.26/$1.
What you should know
Afreximbank recently released $2.25 billion out of the $3.3 billion foreign exchange (FX) support facility to Nigeria’s FG to relieve the acute liquidity shortage in the country’s FX market.
This pivotal agreement was officially signed on December 29, 2023, marking a milestone in the financial cooperation between the involved entities, who also recently signed a $150 million deal.
- In this strategic financial arrangement, Afrexim Bank, fulfilling its role as the Mandated Lead Arranger, works in close coordination with the United Bank for Africa, which assumes the responsibility as the Local Arranger.
- The facility was successfully finalized with NNPC Limited acting as the principal financier.
The arrangement also includes Guvnor and Sahara Energy as key participants in the transaction, highlighting the collaborative effort of multiple stakeholders.
- The total transaction value is US$3.3 billion, a facility obtained through Afrexim bank to help boost dollar supply towards alleviating Nigeria’s current FX supply challenges in the NAFEM official trading window.
- The first tranche of the transaction amounts to US$2.25 billion. This sum will be deposited into a designated account at the Central Bank, and it is expected to ease forex liquidity pressures.
- UBA is also functioning as the Onshore Depository Bank for this arrangement.
- The Nigerian National Petroleum Corporation (NNPC) is facilitating the financing of this transaction, acting as a lender. Other major oil trading firms involved as sub-lenders include Sahara Energy, Vitol, Oando, and Gunvor.
- In addition to their roles in the transaction, UBA, Sahara Energy, Vitol, Oando, and Gunvor contributed $100 million to the facility.
