By Louis Achi
The AFREXIMBank is struggling to raise the $3 billion loan it agreed to provide to the Nigerian National Petroleum Company Ltd in August, according to an exclusive report by Empowered Newswire.
Afreximbank’s mandate is to finance and promote intra- and extra-African trade using three broad services: Credit (Trade finance and Project finance) Risk-bearing (Guarantees and Credit Insurance)
But the report by Empowered Newswire stated that AFREXIM Bank is unable to raise the money as it is not a depositors’ bank.
In August, 2023 the NNPCL said it had secured an emergency $3 billion crude oil repayment loan to stabilise Nigeria’s exchange rates.
The company said this in a tweet, adding that the $3 billion was from AFREXIMBank, the trade finance bank for Africa.
The money, according to NNPCL, will be used to increase the value of the country’s currency, naira, at the international market.
Empowered Newswire further stated that the NNPCL came up with the idea in what was deemed a brilliant concept just as President Bola Tinubu’s administration terminated the Dual Foreign Exchange policy two months ago in a bid to sanitise the FX market.
Quoting sources, Empowered Newswire reported that AFREXIM Bank can only raise $500 million by itself and therefore the financial institution has resorted to seeking out the money as a loan to it from some other global banks in the US, Singapore, India and other parts of the world.
Reliable sources in New York financial circles confirmed that staff and agents of AFREXIM have been shopping for funds and financial instruments in the US in the last few weeks and discussing raising funds from top notch American Banks like JP Morgan Chase and Citigroup among others.
A member of the Board of one of the banks who spoke on condition of anonymity told Empowered Newswire over the weekend that some of the US banks raised questions about Nigeria’s strategy of using a third party non-deposit financial institution and broker.
“It raises credibility issues,” the board member said.
He added that Nigeria has top notchers and executives who are Nigerian citizens in the New York financial markets and across the world who could easily provide a more credible and cheaper means to raise the funds for Nigeria. In New York alone, there is Mr. Bayo Ogunlesi and Mr. Jide Zeitlin, it was noted.
While Ogunlesi, an investment banker is currently chairman and managing partner at the private equity firm Global Infrastructure Partners (GIP), Zeitlin is the immediate past CEO of Tapestry — parent company of international luxury brands such as Coach, Kate Spade and Stuart Weitzman.
Outside New York, there is Kase Lawal, a Texas-based oil business guru and the chairman of Unity National Bank of Texas.
Besides seeking the funds from US banks, AFREXIM Bank is also reported to be shopping for the money from international oil traders.
But industry watchers in the US are also concerned that the option of engaging a broker instead of a deposit bank could raise the level of risk involved in the loan since AFREXIM would have its own charges besides those of the eventual financiers it may manage to enlist.
According to the NNPCL, the loan which will be repaid using a limited amount of future crude oil production – will enable the company to settle taxes and royalties in advance while supporting the Nigerian government to stabilize the local currency from devaluation against global major currencies.
According to NNPCL in a press statement, “A strengthened Naira as a result of this initiative will lead to a reduction in fuel cost. This means that if the Naira appreciates in value, the cost of fuel will drop and further increases will be halted.”
AFREXIM Bank, a development bank, has a mix of shareholders drawn from public and private entities divided into four classes and consist of African governments, central banks, regional and sub-regional institutions, private investors and financial institutions, as well as non-African financial institutions, export credit agencies and private investors.
The bank, according to public records “provides loans, guarantees, letters of credit and advisory services to sovereigns and private-sector entities. As part of the mandate, it also extends countercyclical loans to assist its member states in tackling the negative economic impact of external shocks”.
The bank operates in 52 African countries who are among its shareholders. It also has offices in a few other parts of the world including the Caribbean Islands.
Unlike other MDBs, however AFREXIM has a profit-driven business model, which focuses on trade finance and most of its loans have fairly short maturity and self-liquidating nature.
The National Observatory had called for urgent public debate and probe into the “questionable $3 billion Emergency Crude Repayment Loan from AFREXIMBank.
In a statement on Sunday, August 20, jointly signed by its President Debo Adeniran and Administrative Secretary Omotaje Olawale Saint, the group described it as ridiculous that NNPCL could borrow such funds which was not meant for revamping the country’s four moribund refineries.
Titled ‘NNPC Limited $3 Billion Loan Without Concrete Industrial Production Would Fritter Away: Time For Public Probe Of NNPCL,’ the group explained that the loan which ostensibly was to shore up support for the national currency and stabilise our Foreign Exchange Market exposes deep gaps in Nigeria’s corporate governance system and values.
It said, “This NNPC Ltd $3 billion loan from Afrexim is gotten in the same ways and manners that Central Bank of Nigeria (CBN) under suspended Godwin Emefiele conducted its affairs – with utter disrespect to the constitution, disdain for the nation’s sovereignty and arrogant dis-interestedness in the plights of pulverised Nigerian citizens.
“The question on the lips of all sane Nigerians, is what is a private limited liability company, NNPCL doing getting a loan from a sovereign state? Is the NNPC Limited now the Central Bank of Nigeria? This loan does not just usurp the duties of the Central Bank, it is also conducted in a veil of conspiratorial secrecy. A vexatiously notorious trait of the NNPC labyrinth.”
