Renowned Capital Market Professor, Uche Uwaleke has said that the $3 billion Emergency Crude Oil Repayment Loan secured by the Nigeria National Petroleum Company (NNPC) Limited would not only make the company unattractive but has created erroneous impression of insolvency on the Central Bank of Nigeria (NNPC).
NNPCL said, the pact would provide some immediate disbursement that would enable it to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.
Meanwhile, Prof. Uwaleke who is the President of the Association of Capital Market Academics of Nigeria, said that “contracting external loans to lend to the CBN creates an erroneous impression of insolvency on the part of the CBN which is not a healthy signal to foreign investors”.
Uwaleke who is also the first capital market Professor in Nigeria, told TheFact Daily that the right thing to do would have been to use what was left of the nation’s external reserves as opposed to taking a loan from Afreximbank or even the IMF.
“Much as intervention in the Forex market by the CBN is desirable, a more cost-effective option would have been to use what is left of our external reserves as opposed to taking a loan from Afreximbank or even the IMF.
“The fact that the 3 billion dollars loan was taken by NNPCL, a company still owned 100% by the Federal government with the Ministries of Finance and Petroleum Resources holding 50% share each, makes it more worrisome.
“By implication, the Federal government that is already saddled with huge debt is borrowing to lend to the CBN, when it should have been the other way round. Ultimately, this new loan contracted by the NNPCL adds to the growing public debt and may have been contracted at nonconcessionary terms being an emergency loan.
“It’s important that Nigerians, especially the National Assembly, are informed about the terms of the loan and the collateral security involved”, he noted.
The former Imo State Commissioner for Finance said, “without doubt, this 3 billion dollars loan on the balance sheet of NNPCL will make the company less attractive and possibly jeopardize the ongoing plan to privatise the company by listing it on the Nigerian Exchange.
“Also, if the security for the loan is some barrels of future crude oil production, at what forward contract price has this been negotiated? In view of the fact that all proceeds of crude oil sales are paid into the federation account, this sort of swap transaction has implications for FAAC receipts meant for the three tiers of government”, he said.
