Why the currency of the loan belongs beside the interest rate

The lowest quoted interest rate can be the wrong starting point for comparing loans. A company earning naira and borrowing in another currency has to consider how much local cash will be required to make each repayment.

That obligation can change even when the business sells the same volume and the loan’s foreign-currency schedule stays unchanged. The exposure belongs in the financing decision from the beginning.

Local-currency infrastructure finance offers a different way to approach the problem. InfraCredit’s published guarantee framework, for example, concerns naira obligations. Availability depends on the particular transaction and assessment.

Compare complete repayment burdens

A useful comparison includes currency, maturity, fees, repayment pattern and any protection against exchange-rate movements. The price and availability of that protection matter. Assuming a hedge will be arranged later leaves an important part of the funding plan unresolved.

The revenue side also needs scrutiny. A business may describe its prices as linked to foreign currency while receiving payment in naira. How quickly can prices adjust? Will customers accept the change? When does the cash arrive?

Match the structure to the business

Export earnings may provide some alignment, but the timing and reliability of those receipts still matter. Imported inputs can also compete for the same foreign currency needed to service debt.

Our view is that currency should be discussed in terms of cash generation rather than broad confidence in a market forecast. Test the proposed structure under more than one exchange-rate assumption and make the implications visible to shareholders.

A financing proposal becomes more useful when it explains what the business can afford under pressure. The headline rate is one input to that judgement, not its conclusion.