Nigeria, the most populous country in Africa, is set to receive a $1.05bn syndicated loan backed by oil from the African Import Export Bank next month.
The loan is part of a larger $3.3bn prepayment facility arranged by Afreximbank, with repayment terms tied to crude cargoes from the Nigerian National Petroleum Company Ltd. (NNPCL).
According to Bloomberg, Afreximbank’s Senior Executive Vice President for Finance, Administration, and Banking, Denys Denya, confirmed the verification of crude availability, paving the way for the final release of the balance within the next month.
The loan aims at reviving Nigeria’s economy and enhancing the supply of hard currency in the local foreign exchange market. A substantial portion of it — two-thirds, was already disbursed in January.
This financial maneuver is designed to provide Nigeria with immediate funds based on future oil production, offering a lifeline to the country’s struggling economy.
The Nigerian National Petroleum Company Limited, had in January said it would prepay future royalties and taxes to the Federal Government from the $3.3bn financing deal it got from African Export-Import Bank last year.
NNPCL disclosed this in a document titled, ‘Frequently Asked Questions – Project Gazelle’, released by its Chief Corporate Communications Officer, Olufemi Soneye.
On August 17, 2023, The PUNCH reported that the NNPCL announced that it had secured a $3.3bn emergency crude oil repayment loan from the African Export-Import Bank.
It explained that the loan would be used by the oil company to support the Federal Government in stabilising Nigeria’s exchange rate.
The company also stated then that it adopted a lower price benchmark for the $3.3bn crude-for-cash loan to reduce the risk of default and ensure financial stability.
Giving details on the benchmark oil price, the company said the facility was using a conservative crude price of $65/barrel to calculate the allocated crude to be produced and sold in the future.
Brent, the global benchmark for crude, sold at about $90.63/barrel on Monday.
Commenting on the benchmark oil price of $65/barrel for the $3.3bn deal, the national oil firm had said, “This provides a safety margin for price fluctuations in the future.
“NNPC Limited has reserved up to 90,000 barrels of crude for Project Gazelle, ensuring sufficient cash flow for repayment and other financial obligations.
“If oil prices rise, more money will come in from selling the 90,000 barrels, allowing for faster repayment. However, if oil prices fall, the repayment may be slower.
“The quantity of crude earmarked (90,000 barrels) is sized to ensure enough cash is available for the repayment of the facility when it is due. This also ensures that NNPC Limited can meet other cash flow obligations, considering the expected future price of crude oil globally.”
NNPCL also said repayments were strategically planned and tied to future oil sales, with conservative pricing in oil sales contracts mitigating the risks associated with oil price volatility.
