The Sea Empowerment and Research Center (SEREC) has urged the Federal Government to implement foreign exchange (FX) risk mitigation frameworks, expand local content and industrial policies, harmonise FX policy, establish a port revenue ring-fencing mechanism, strengthen transparency and governance as well as accelerate customs modernisation and data integration to mitigate associated risks in the port financing deal with the United Kingdom.

According to the group, the strategic measures will protect Nigeria against FX and fiscal risks associated with the £746 million port infrastructure financing agreement.

In an advisory titled, ‘Nigeria–UK Port Infrastructure Financing: Strategic Implications for Foreign Exchange Stability, Trade Competitiveness, and Customs Modernisation’, signed by the Head of Research, Dr Eugene Nweke, SEREC highlighted that the UK-backed deal comes with procurement requirements limiting domestic participation and technology transfer while immediately sending capital outflows to the UK.

SEREC proposed currency hedging instruments for the external loan, dedicated FX buffer accounts tied to project revenues and diversifying currency exposure in sovereign borrowing, developing domestic capacity in steel production, marine engineering and port logistics.

The group also recommended ring-fencing port-generated revenue to support loan servicing and FX reserves, dedicating a portion of port-generated revenue and accelerating customs modernisation through pre-arrival information systems, AI-driven valuation benchmarking and real-time cargo tracking.

The centre called for enhanced transparency and governance, with public disclosure of loan terms, interest rates, repayment schedules and strengthened legislative oversight at the National Assembly.

SEREC also called for harmonisation of trade policy and FX management strategy to reduce import dependency through targeted industrialisation and strengthen export diversification to improve FX inflows.

The research centre identified key policy issues in the deal, which include tied financing and a limited domestic multiplier, especially as a notable portion of the loan is contractually tied to UK suppliers, resulting in reduced participation of Nigerian firms, limited technology transfer depth and immediate capital outflows to the lender’s economy.

The issues identified included foreign exchange exposure and currency mismatch, noting that Nigeria’s borrowing in pounds sterling (£) introduces currency mismatch risk (earnings largely in USD, exposure to exchange rate volatility and increased debt servicing burden under Naira depreciation.

SEREC also identified an immediate FX leakage effect, warning that the financing structure enables direct offshore payments to foreign contractors, with minimal retention of FX within Nigeria’s domestic system.

The group highlighted the implications for Nigeria as weak support for the country’s external reserves and domestic liquidity, policy inconsistency, multiple exchange rate windows, and high import dependency.

SEREC stated that external borrowing tied to foreign procurement can intensify FX demand pressures and undermine macroeconomic stability.

On the implications for Nigeria, SEREC identified the risk of debt-induced FX instability, adding that without hedging mechanisms, Nigeria faces rising cost of debt servicing, increased pressure on FX reserves and potential balance of payments stress.

“Nigeria must transition from passive participation in externally driven financing arrangements to a strategically coordinated model that integrates infrastructure development with foreign exchange stability, domestic industrial growth, and institutional accountability,” the group concluded.