Afrexim Bank is tapping oil traders to finance a much-needed $3 billion loan to Nigeria's state oil company to help shore up the sliding naira currency, three sources told Reuters.
Afrexim approached traders in recent weeks seeking their interest in funding the oil-backed loan to state oil company NNPC LTD, the sources said. It is now working to craft terms that it will offer to the trading houses.
"There is a lot of interest, but they need to see terms," one oil executive close to the talks told Reuters. The executive added that oil prices climbing past $90 per barrel would help drive interest in the deal.
Traders who put up cash would be repaid in physical cargoes of oil. The bank is working to determine what amount of oil to offer those traders in exchange for the financing, one of the sources said.
An NNPC spokesman did not respond to a request for comment. Afrexim did not immediately comment.
The loan, announced by NNPC in August, is a key part of efforts to support the naira, which hit an all-time low of 1,000 to the dollar on the black market on Tuesday. Officials have said that the central bank has a nearly $7 billion backlog in naira forwards. This is limiting the availability of dollars on the official market, forcing businesses and individuals to seek them on the black market.
Shortly after taking office in May, President Bola Tinubu announced long-sought reforms that allowed the official naira rate to fall versus the dollar and fuel prices to roughly triple. In June, the naira was close to the black market level, but the gap has since widened.
Tinubu also allowed pump prices to more than triple, which cut fuel smuggling and took pressure off state oil company NNPC to import petrol. But NNPC is still using oil cargoes to repay some of the oil trading firms that had contracts to supply gasoline in exchange for crude, limiting its immediate access to oil.
(Reporting By Libby George and Julia Payne; editing by Timothy Gardner)