Nigerian National Petroleum Corporation (NNPC) Limited has secured a $3 billion emergency crude repayment loan to support the naira and stabilise the foreign exchange market.

NNPC Limited secured the crude-for-cash funding from the African Export-Import Bank (Afreximbank) headquarters in Cairo, Egypt.

While the details are still sketchy, it is understood that NNPC will repay the loan with crude oil at an interest rate between eight percent and 11 percent.

“NNPC Ltd. and Afrexim Bank have jointly signed a commitment letter and Termsheet for an emergency $3 billion crude oil repayment loan,” NNPC said in a terse statement on Wednesday.

“The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd. to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.”

Commenting on the development, Ajuri Ngelale, special adviser to President Bola Tinubu on media and publicity, said the new FX accretion is to enable NNPCL defray taxes and royalties in advance and provide the federal government with dollar liquidity to stabilise the naira via incremental releases based on the federal government’s needs.

“Stronger NGN = Lower Fuel Costs. This is a major buffer against the need to re-engage in subsidy regime,” Ngelale said in a X post on Wednesday.

The loan will save Nigeria from approaching the International Monetary Fund (IMF) for loans, and bring respite to the local currency, which had depreciated significantly against the dollar over the past week.

The naira depreciated on Friday to close the week at an all-time low of N950 to the dollar at the parallel market.

On Monday, President Bola Tinubu met with the acting CBN governor, Folashodun Shonubi, who said the apex bank would roll out its plans to stabilise the naira.

The local currency appreciated Wednesday, recovering from N950 per dollar to N890 to the greenback.

Nigeria produced an average of 1.255 million barrels of oil daily in July 2023, according to data from the Organisation of Petroleum Exporting Countries (OPEC).

The Cable