According to a report by JP Morgan, the Nigerian government could raise up to $17 billion if it sells down its stake in most joint-venture oil and gas assets. This move is expected to boost foreign exchange earnings and external reserves, helping ease forex pressure in the country.
JP Morgan’s report comes in the context of Nigeria’s efforts to counter a weakening economy, which has been affected by a struggling property market, reduced consumer spending, and declining credit growth.
The report also highlighted the Central Bank of Nigeria’s declining net foreign exchange reserves, which were around $3.7 billion at the end of 2022, down from $14 billion at the end of 2021.
JP Morgan noted that the sale of the stake in joint-venture oil and gas assets is a proposal that could provide much-needed relief in the medium term. The bank also mentioned the recently announced $3 billion loan to the Nigerian National Petroleum Corporation (NNPC), which could help improve FX liquidity conditions by allowing the NNPC to sell dollars to the CBN and remit the naira proceeds to the government as upfront payments for oil revenues and taxes.
Despite these measures, JP Morgan warned that the large external financing needs of the private sector will continue to put pressure on forex reserves. It also projected that Nigeria’s inflation rate could spike to 28% by the end of 2023 and that the naira would further depreciate against the dollar, despite the CBN’s efforts to stabilize the forex market.
The report indicated that the removal of fuel subsidies, changes in foreign exchange liquidity, and the CBN’s financial records were the factors influencing its projections.