Dynamic pool payment facility is a first in West Africa

The challenge

Nigeria is the world’s fifth largest producer of liquefied natural gas (LNG) globally, and Nigeria LNG Limited (NLNG) plays a vital role in the industrial and economic development of the West Africa region. The company’s strategic aim is to increase production capacity by one third through a US$12bn expansion plan. The company’s treasury plays a significant role in achieving this goal by ensuring cash is secure, optimising the use of liquidity, reducing operating costs and enhancing yield.

NLNG embarked on a project to centralise its treasury management, improve visibility and control over funds and enhance yield on any surplus cash. There were some specific challenges that treasury was looking to resolve. For example, in the past, treasury had to write to its banks to instruct them to transfer funds from NLNG’s call account to its current account with the respective bank. This was time-consuming and prone to error. It also gave little flexibility in liquidity terms.

NLNG approached its banks for solutions as part of its treasury management centralisation and optimisation initiative. While various banks were developing digital solutions and strategies, these were at different levels of maturity and were less comprehensive than those of Standard Chartered Bank.

The solution

NLNG worked with Standard Chartered Bank to implement the first dynamic pool payment facility in West Africa. Under this arrangement, cash is held in a call account (ie an investment account that offers both liquidity and a higher yield).

While a small balance is held on the current account (used to make payments), the daily value of payments going through this account on any particular day is often far higher. The intra-day shortfall in the current account created by outgoing payments is funded automatically from the call account. The solution, which incorporates SWIFT connectivity from NLNG’s enterprise resource platform (SAP), provides a fully automated intra-day pool account funding capability, enabling a streamlined payments process and full visibility over external flows and internal sweep transactions while maximising security, liquidity and yield.

Key benefits of the dynamic pool payment facility

Centralisation and strategic benefit: ability to centralise the company’s NGN funds into a single account whilst significantly enhancing the company’s ability to finance its future growth ambitions.

Visibility and control: full visibility and control of liquidity through a single window, Straight2Bank Liquidity.

Security: risk of fraud mitigated by removing human intervention from the process of funding the current account.

Liquidity: cash is available from the call account to fund daily payment obligations, maximising liquidity.

Yield: optimised on surplus cash in a secure manner, without the need to dedicate time and specialist resources to investment.

Operational efficiency: SWIFT connectivity to the bank enables the seamless flow of transactions and data and maximises the number of successful payments.

Best practice and innovation

This is the first dynamic pool payment facility to be implemented in West Africa, supported by SWIFT connectivity. It offers a valuable example for other companies operating in, or headquartered in the region, seeking to optimise cash and liquidity management and to enhance their operational processes.

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