NNPC approves crude-for-loan agreements totalling $8.86 billion
The Nigerian National Petroleum Company Limited (NNPC) has announced a bold initiative to secure its financial footing through a series of crude-for-loan agreements totalling $8.86 billion.
By committing to deliver 272,500 barrels of crude oil daily, NNPC is set to allocate approximately 8.17 million barrels each month to various loan projects.
An analysis by the Nigeria Extractive Industries Transparency Initiative, alongside NNPC’s financial statements, reveals that these agreements encompass significant ventures, including Project Panther, Project Bison, and Project Gazelle, among others.
As of now, NNPC has successfully repaid $2.61 billion of its loans, marking a notable 29.4% of the total credit facility, while $6.25 billion remains outstanding.
Out of the $8.86 billion in credit secured, approximately $6.97 billion has already been drawn from seven crude-for-loan deals.
One of the standout projects, Project Panther, represents a joint effort between NNPC and Chevron Nigeria Limited.
This initiative secured a $1.4 billion loan facility, backed by both international and local banks, and involves a pledge of 23,500 barrels per day to service the debt.
Repayment terms include a margin of 5.5% over the Secured Overnight Financing Rate (SOFR) with repayments commencing post-moratorium.
Meanwhile, Project Bison aims to bolster NNPC’s equity stake in the Dangote refinery.
Though initially targeting a 20% stake, NNPC ultimately acquired 7.25%. The project obtained a $1.04 billion loan from Afrexim Bank, with 35,000 barrels per day pledged as collateral, and has already fully repaid this loan.
Project Eagle Export Funding, a trio of loans, has also made strides. The original $935 million loan, secured in 2020 and backed by 30,000 barrels per day, was fully repaid by September 2023.
A subsequent loan of $635 million followed suit. The third tranche, for $900 million, is scheduled for repayment starting in June 2024.
Further initiatives include Project Yield, which supports the Port Harcourt Refining Company with a $950 million loan and a pledge of 67,000 barrels per day, slated for repayment beginning in December.
However, despite these efforts, the refinery has yet to commence production, with previous promises from NNPC and the Federal Ministry of Petroleum Resources remaining unfulfilled.
The latest endeavour, Project Gazelle, aims to stabilize Nigeria’s foreign exchange market. NNPC secured a $3 billion forward sale agreement in December 2023, committing 90,000 barrels per day from production-sharing contract assets to meet future tax and royalty obligations.
By the end of 2023, $2.25 billion had been drawn, with repayments expected to begin mid-2024.
Despite these proactive measures, Nigeria continues to face hurdles in boosting oil production. The NEITI 2022-2023 report highlights a worrying decline in output, plummeting to the lowest levels in a decade.
Although production rose slightly to 537.57 million barrels in 2023, this still represents only 67.16% of the country’s peak capacity.
Major challenges include production deferments, which reached 110.66 million barrels in 2023, primarily due to unscheduled maintenance and rampant oil theft.
In light of these ongoing issues, the House of Representatives Special Joint Committee has instructed NNPC to halt further crude-for-loan agreements.
This directive follows revelations that NNPC is seeking an additional $2 billion in oil-backed loans to address a $6 billion backlog owed to international traders, exacerbated by the recent removal of fuel subsidies.
President Bola Tinubu faces the daunting task of implementing reforms in Nigeria’s oil sector, including eliminating fuel subsidies and stabilizing the naira, all while ensuring that the cost-of-living crisis does not overwhelm the population.
