Nigeria’s central bank is setting aside 500 billion naira ($2.5 billion) for loans to non-oil exporters, after a slump in oil revenues led to the worst crisis in Africa’s biggest economy in decades.
The OPEC member, whose economy shrank 0.4 percent in the first quarter, has been hit hard by a slump in global oil prices. It relies on sales of crude for around 70 percent of national income and 90 percent of foreign exchange earnings.
The central bank said it will invest in a 500 billion naira debenture to be issued by Nigerian Export- Import Bank (NEXIM) as part of a bid to diversify the country’s revenues away from crude.
Nigeria was Africa’s top oil producer until a series of militant attacks on pipelines pushed crude production to a 30-year low. The value of its exports, mostly crude, plunged 52 percent to 1.27 trillion naira in the three months to March from a year ago.
It expects to nearly double its non-oil revenues this year to counter the effect of lost crude income. The facility is essentially designed to redress the declining export credit and reposition the sector to increase its contribution to revenue generation and economic development," the central bank said.
It will improve export financing, increase access of exporters to low interest credit and offer additional opportunities for them to upscale and expand their businesses, it added.
The bank said loans for up to three years would be granted at a maximum all-in interest rate of 7.5 percent a year. Loans of more than three years will be granted at a maximum rate of 9 percent a year.
Much of the hard currency Nigeria needs to finance imports evaporated as the central bank burned dollars in an attempt to peg the naira at 197 to the dollar, which it gave up under new FX guidelines introduced on Wednesday.
The new market-driven trading regime is likely to weaken the naira. Nigerian exports will become relatively cheap, but imports more expensive.