FG Moves to Securitise NLNG Dividends for $7bn Cash

*To utilise proceeds to settle backlog of FX forwards, flood market with dollars 

*FX speculators may suffer losses

Obinna Chima

As part of efforts to boost foreign currency liquidity in the economy and strengthen foreign exchange (FX), the federal government has concluded plan to securitise about $7 billion of the country’s dividends from the Nigerian Liquefied Natural Gas (NLNG).

A top official in the present administration who disclosed this to THISDAY yesterday, said while the government expects to get $7 billion from a consortium led by Standard Chartered Bank from next week, the federal government also expect inflows from the $3 billion emergency loan from the African Export-Import Bank (Afreximbank), which the Nigerian National Petroleum Company Limited (NNPCL) had secured two months ago, bringing the total inflows expected in the short-term to $10 billion.

The arrangement is being organised by the Federal Ministry of Finance Incorporated, which is the shareholder of the NLNG.
The move aligns with the recent disclosure by the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, that the country was expecting about $10 billion inflows in the nearest term, which according to him would help to clear FX backlog and stabilise the naira.

Speaking at the 29th Nigerian Economic Summit in Abuja on Monday, President Bola Tinubu had also assured Nigerians and investors that there was an ongoing plan to boost the country’s foreign exchange liquidity.
Tinubu had acknowledged challenges faced by the business community in the financial markets and had assured them of additional FX liquidity to restore market confidence.

Speaking further, the source told THISDAY: “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 securitise these dividends over a period of time and use it to borrow money in order 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 Standard Chartered Bank consortium and get the $3 billion from Afreximbank, under the agreement reached with NNPCL.
“At 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.”

Market analysts believe that with the steps, the nation currency which has come under intense pressure in the past few weeks might begin to appreciate. They believe this could help the naira appreciate to around N1,000/$ and make currency speculators to lose their shirts.
This, they also believe could be achieved if oil production was improved and crude oil theft significantly curbed.

Meanwhile, the naira closed at N1,300 to a dollar on the parallel market yesterday, stronger than the N1,310 to a dollar it closed the previous day, while on the official I&E FX Window, it closed at N837.49 to a dollar, weaker than the N801.10 to a dollar it closed the previous day.