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IFC’s $73.5m project deal: Boost to export, forex inflows

By Chijioke Nelson
13 July 2016   |   4:22 am
A renewed hope for free flowing foreign currency-denominated investments bolstered on Monday, with the intervention of the World Bank’s investment arm in a port terminal project.
CBN governor

CBN governor

A renewed hope for free flowing foreign currency-denominated investments bolstered on Monday, with the intervention of the World Bank’s investment arm in a port terminal project.

Specifically, the International Finance Corporation IFC, a member of the World Bank Group, unveiled a $73.5 million loan facility to OIS Indorama Port Limited.

The facility represents a support for the development of a multi-purpose port terminal at Onne in Port Harcourt, Rivers State. The terminal, when completed, will serve as a platform for direct exports of fertilizer to foreign markets and generate critical foreign exchange (forex) and help the country diversify from dependence on crude oil exports.

Presently, Nigeria relies on crude sales for about 90 per cent of its foreign exchange and is reeling in pains from a plunge in oil prices, while the government has opted for full diversification as a strategy to aid the faltering economy and hedge against future uncertainties.

Nigeria’s need to diversify away from its reliance on crude sales has intensified in the wake of a spate of attacks on oil and gas facilities in the Niger Delta over the last few months that in spring briefly pushed oil production to 30-year lows.

IFC’s Country Manager for Nigeria, Eme Essien Lore, said: “IFC is committed to supporting investments in key infrastructure that will help facilitate the growth of Nigeria’s non-oil sector.

“This port project will boost the commercial viability of Eleme Fertilizers, improve its access to export markets and support the manufacturing sector and improve job creation. “It will further demonstrate the Federal Government’s commitment to supporting foreign direct investments in Nigeria’s infrastructure.”

The total project cost is $150 million and IFC is providing a $73.5 million debt package comprising a $52.5 million of its own funds and a $21 million parallel loan mobilised from a commercial bank.

Rand Merchant Bank of South Africa, with presence in Nigeria as one of the fully licensed merchant banks, is providing an additional $31.5 million loan.
Indorama Port is located at Onne port, about 16 kilometers south-east of the Eleme Fertilizer plant. It includes a 295-meter multipurpose jetty, storage facilities suitable for fertilizer consisting of a 45,000 metric ton warehouse for urea with an automated material handling system.

The port terminal will have the capacity to handle up to 2 million tons per annum of dry bulk urea exports, 12,000 twenty-foot equivalent units of containers and 150,000 pieces of breakbulk cargo per annum; it will be compliant with the International Ship and Port Facility Security code.

The Managing Director of Indorama Nigeria, Manish Mundra, said: “This project will boost development in the maritime sector and demonstrate our determination to support economic development in Nigeria and help ensure the success of our investment in our urea facility.

“IFC, our long term partner, has worked with us extensively to invest and mobilise much needed foreign direct investment in the sector.”Indorama Port is a joint venture between Indorama Eleme Petrochemicals Limited and Oil and Industrial Services Limited (OIS).

Part of the project will handle bulk urea exports and will be operated by Indorama and another section, operated by OIS, will handle general cargo, break bulk, and containers servicing the off-shore oil and gas industry.

Indorama Port’s material handling systems is in the process of being commissioned with loading of the first vessel expected in middle of this month. IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. It is currently working with more than 2,000 businesses worldwide, using its capital, expertise, and influence, to create opportunity where it’s needed most.

In 2015, its long-term investments in developing countries rose to nearly $18 billion, helping the private sector play an essential role in the global effort to end extreme poverty and boost shared prosperity.

Perhaps, the deal was brokered as a follow up to the new forex policy, which is expected to unlock Foreign Direct Investments into the country that has been held back due to controversies on Naira-peg for 16 months.

CBN Governor, Godwin Emefiele, at the launch of the Naira-settled Over-The-Counter (OTC) Foreign Exchange (FX) Futures, expressed delight that the foreign exchange market in Nigeria has attained the position where participants in Nigeria can settle foreign exchange futures transactions in Naira.

Represented by the Special Adviser, Financial Market, Emmanuel Ukeje, the governor said the “product is novel in Nigeria and it gives comfort regardless of the price at which you have quoted to buy foreign exchange in Nigeria.”

The product is also expected to provide relief to Nigerians seeking dollars to import critical machinery and raw materials from abroad as they can now lock-in their foreign exchange deals in earnest against their future demands.

Since the new policy started, dollar supply from multinationals and foreign currency earning corporates to the interbank market is estimated at $37.2 million.

About two days after the launch of Naira-settled OTC, the CBN and Citibank executed the country’s first Naira-settled Futures trade against the dollar, estimated at $20 million. However, the parallel market rates have hovered around N333-N351 from the onset of the new policy to date.

The Managing Director/Chief Executive Officer of FMDQ, Bola Onadele, said: “The futures market is an opportunity to transform risk into certainty – a major paradigm shift in the financial markets landscape. This innovation provides opportunities for government, businesses, pension fund administrators, investors, individuals, to hedge (not speculate) and cope with exchange rate risks.

“It also affords the CBN a greater opportunity to manage exchange rate volatility, thus achieving greater market confidence, liquidity, improvement in business planning, job security, employment, better allocation of resources, global competitiveness of the Nigerian financial markets, and all in all, a thriving economy,” he said.

Analysts and financial market operators are optimistic that the new policy would attract foreign investments, but first in gradual steps, as the investors would want to take time to see the outworking of the policy.