CBN confirms $2.9b deposit in special account to stabilise forex market

A Special account with $2.9 billion deposit has been created by the Central Bank of Nigeria (CBN) to stabilise the foreign exchange (forex) market.

The apex bank, which identified the special account as Gazelle Funding Account, dropped the hint during the last Federation Account Allocation Committee (FAAC) meeting.

The Nation learnt that the revelation was made after the FAAC Post Mortem Sub-Committee members noticed in last month’s report from the Nigerian National Petroleum Company Limited (NNPCL) that proceeds from Production Sharing Contract (PSC) Tax and Royalty sales were transferred to the Gazelle Funding account.

The CBN backed NNPCL’s explanation, stating further that the Federal Government secured the $3.3 billion loan from Afrexim Bank to stabilise the forex market.

The sub-committee report said: “The structure of the loan requires NNPCL to deposit PSC Royalty and Tax proceeds into the Gazelle Funding account. From these deposits, 90 per cent will be released to NNPCL and CBN, while 10 percent will go towards repaying the loan.”

Members of the FAAC sub-committee, who recognised the potential benefits of special funding for forex stability, however raised concerns about the process and transparency of the loan arrangement.

“Representatives from states and local governments noted that they had not been informed about the loan prior to this meeting,” a source told The Nation.

Responding to the concern, the sub-committee has asked the NNPCL to organise a stakeholders’ meeting to offer a platform to inform all relevant parties about Project Gazelle Funding and explain the purpose, structure and repayment plan for the loan.

The source said: “The goal is to ensure transparency and accountability. The stakeholder’s meeting is expected to address several issues, including: The criteria used to justify the $3.3 billion loan amount; the selection process and reasons for using a special purpose vehicle for the loan; the long-term implications of using future oil sales as collateral and measures to ensure transparency and accountability in managing the loan.

On June 6, the African Export-Import Bank (Afreximbank) announced the release of an additional $925 million for Nigeria’s oil-backed prepayment facility into the Project Gazelle Funding account. This facility is originally sponsored by the Nigerian National Petroleum Company Limited (NNPCL).

“This latest disbursement brings the total amount funded under the syndicated $3.3 billion prepayment facility to $3.175 billion. Afreximbank coordinated the facility under an ‘accordion’ arrangement and gathered $925 million from a group of lenders that includes notable companies like Oando Group and Sahara Energy Resource Limited.

“This ‘accordion disbursement’ allows Nigeria to potentially ‘stretch’ the loan amount beyond the $3.3 billion within a set limit, depending on their needs and the approval of the lenders.

“This feature allows Nigeria to access additional funds if needed, without renegotiating the entire loan agreement. Knowing there’s potential for an increase can help with more flexible financial planning for Nigeria. While the agreement allows for additional disbursements, it doesn’t guarantee them. The lenders (oil consortium) have a say in whether or not to approve the increase.”

President/Chairman of Board of Directors, Afreximbank’s Prof Benedict Oramah, highlighted the significance of the development.

Oramah, who emphasized that it showed the bank’s vital role in supporting development across Africa, stated: “This milestone demonstrates the bank’s capabilities as a crucial development partner for Africa. It reaffirms our commitment to assisting our member states in achieving economic growth and stability. This funding will greatly support Nigeria’s short and long-term economic development priorities.”

He praised the original facility, calling it a “landmark” for being the largest crude oil-backed facility in Nigeria and one of the largest syndicated debts in Africa.

“This project underlines the importance of such financial structures in fostering economic development and stability in the region”, Oramah said.

The Project Gazelle Funding Limited is a key part of Nigeria’s strategy to leverage its oil resources for economic growth.

The funds will be used to support various development initiatives and stabilise the country’s foreign exchange market.

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