The naira is in free decline once more as a $3 billion loan secured by the government-owned oil company NNPCL, which was meant to provide the foreign currency market with much-needed dollar liquidity, appears to be stalling.

    According to information gathered from numerous street dealers, the naira swapped for a new low of N920 per USD on Wednesday, August 29, after trading for N850 per USD, up from N910/$ in street trading within two days of the NNPCL’s announcement of the loan contract on August 16.

    According to sources acquainted with the $3 billion loan transaction, it has been put on hold because the investors who were expected to fund the remaining portion of the syndicated loan have changed their minds, leaving just the African Export-Import (Afrexim) bank, which cannot offer all the funds on its own.

    The nation’s deteriorating finances and seeming desire to defend the naira have been cited as the causes of the abrupt change of heart.

    BusinessDay was told by a source acquainted with the transaction that “Afrexim bank can’t do it alone” because of its excessive exposure to Nigeria and its single obligor restriction.

    Read Also Naira drops by 0.42% as the FX market experiences minimal turnover.

    Tuesday’s official market saw a 0.42 percent decline in the value of the naira despite a little increase in the number of transactions.According to data from the FMDQ, the daily FX market turnover, which indicated the amount of transactions at the official market, rose slightly by 3.36 percent to $71.32 million on Tuesday from the $73.80 million recorded on Monday.

    Another individual with knowledge of the transaction who was not permitted to speak publicly stated, “NNPC is too big a risk so Afrexim bank can’t close the deal without some other investors.”

    The market has run out of patience after the deal’s initial announcement two weeks ago. Since then, there has been no increase in the nation’s foreign exchange reserves, and more crucially, the CBN’s dollar supply has remained low.

    Naira to dollar exchange rate
    Naira Vs dollar

    Reforms are hampered by the CBN governor’s uncertainty.
    The naira is suffering as the loan deal goes on, and things could become worse as Nigeria struggles to get by without a permanent CBN governor to calm the storm.

    Some investors argue that Nigeria needs a CBN governor who will move quickly to lay out a new plan for managing the country’s foreign exchange after the audacious decision to “liberalize” the market in June. They argue that the lack of a substantive CBN governor is a more urgent issue for the naira than the stalled $3 billion loan deal.

    The CBN governor’s uncertainty hinders reforms.
    Nigeria is struggling to get by without a permanent CBN governor to quiet the tempest, and things could become worse as the loan deal progresses.

    Despite allowing its currency to depreciate by a record amount, Nigeria’s naira is the worst-performing African currency this year, falling more than 40% against the dollar. Nigeria’s exchange rate market is still fragmented, which threatens to undermine the benefits of the early changes.

    Following the bold decision to “liberalize” the market in June, several investors contend that Nigeria needs a CBN governor who will act promptly to outline a new strategy for controlling the country’s foreign exchange. They contend that the postponed $3 billion loan deal is not as urgent a concern for the naira as the absence of an effective CBN governor.

    A top investment banker from Nigeria stated, “You need someone who can make big decisions,” in reference to the CBN’s apparent leadership vacuum.”The current lot will run a holding operation until a substantive governor is named and leaves the door open to uncertainty,” the banker stated.

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