Will securitising NLNG dividends ease Nigeria's FX woes?

The Nigerian government is taking steps to address the ongoing foreign exchange liquidity challenges by considering securitising approximately $7 billion of its dividends from the Nigerian Liquefied Natural Gas (NLNG). Adeoye Adefulu, a Partner at Odujinrin and Adefulu, shared insights on this move and its potential impact during an interview on CNBC Africa. The government's plan to leverage NLNG dividends to boost FX liquidity raises questions about the effectiveness and long-term benefits of such a strategy. Adefulu highlighted the need for transparency in the utilization of the funds and emphasized the importance of investing in initiatives that can deliver sustainable returns for the Nigerian government and its people. Adefulu compared the securitisation of NLNG dividends to previous approaches like crude swaps and joint ventures in the oil and gas sector. He noted that the securitisation strategy offers a more transparent and straightforward mechanism to tap into future revenue streams. While acknowledging the criticism from development finance institutions like the African Development Bank (AfDB) and the International Monetary Fund (IMF), Adefulu underscored the importance of exploring a diversified range of options to address the FX liquidity challenge. The discussion also touched on the delayed revival of the Kaduna refinery, which is expected to come online by the end of 2024. Adefulu pointed out the historical challenges faced by Nigeria in efficiently managing its refineries and raised concerns about the commercial viability of the refinery projects. The Partner at Odujinrin and Adefulu questioned whether the government and the Nigerian National Petroleum Corporation (NNPC) have the capacity to effectively turnaround the refineries and make them commercially successful. Amidst the focus on FX liquidity and refinery revitalization, the interview briefly mentioned the importance of energy transition initiatives such as the compressed natural gas (CNG) bus program. These efforts aim to support Nigeria in navigating the energy landscape towards more sustainable and efficient solutions. However, the conversation ended before delving deeper into the significance of these initiatives. In conclusion, Nigeria's decision to securitise NLNG dividends reflects a multifaceted approach to addressing the country's FX liquidity challenges. As the government explores different strategies, including refinery rehabilitation and energy transition programs, the key will be to prioritize transparency, cost-effectiveness, and long-term sustainability in its initiatives.