The Nigerian National Petroleum Company Limited, NNPCL, has committed 272,500 barrels of crude oil per day as collateral for a series of crude-for-loan agreements worth $8.86 billion.
This arrangement, aimed at addressing various financial obligations, will see approximately 8.17 million barrels of crude allocated monthly towards these deals.
The agreements, which include several major projects such as Project Panther, Project Bison, and Project Gazelle, were highlighted in a recent report by the Nigeria Extractive Industries Transparency Initiative, NEITI, and NNPCL’s financial statements.
To date, NNPCL has repaid $2.61 billion, accounting for 29.4% of the total loan, while $6.25 billion remains outstanding. Out of the total $8.86 billion credit facility, about $6.97 billion has been disbursed across seven crude-for-loan deals.
One of the standout projects, Project Panther, is a joint venture between NNPCL and Chevron Nigeria Limited, financed through international and local banks. The venture secured $1.4 billion in loans, with 23,500 barrels per day, bpd, of crude oil pledged for repayment. Repayments for the project will start after a moratorium period, with a financing rate of SOFR (Secured Overnight Financing Rate) plus a 5.5% margin and a liquidity premium.
Another key initiative, Project Bison, relates to NNPCL’s acquisition of a 7.25% stake in the Dangote Refinery. This deal secured a $1.04 billion loan from Afreximbank, with 35,000 bpd pledged as collateral, and the loan was fully repaid in June 2024.
Project Eagle Export Funding encompasses three loans aimed at addressing various financial commitments. The original loan of $935 million was secured in 2020 and serviced with 30,000 bpd of crude. This loan, along with a subsequent $635 million loan, was fully repaid by September 2023. The third tranche, valued at $900 million, was secured in 2023, with 21,000 bpd pledged for repayment, which is scheduled to commence in June 2024 and conclude in 2028.
Another major project, Project Yield, is a $950 million facility aimed at refurbishing the Port Harcourt Refinery, with 67,000 bpd of crude pledged for repayment. The loan, secured in 2022, is set for repayment beginning in December 2024. However, despite this funding arrangement, fuel production at the Port Harcourt refinery has yet to commence, with numerous delays and missed deadlines as of August.
In addition, the Project Gazelle deal was established to stabilize Nigeria’s foreign exchange market. In December 2023, NNPCL secured a $3 billion forward sale agreement, pledging 90,000 bpd from Production Sharing Contract assets. Of this amount, $2.25 billion had been drawn by the end of 2023, with repayments scheduled to start by mid-2024.
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These crude-for-loan deals come at a challenging time for Nigeria, which is grappling with declining oil production. NEITI 2022-2023 report has disclosed that Nigeria produced only 490.94 million barrels of crude in 2022, marking the lowest output in a decade. Though production slightly improved to 537.57 million barrels in 2023, it still falls significantly short of the country’s peak production of 798.54 million barrels in 2014.
One of the persistent challenges is production deferment, which saw Nigeria lose 110.66 million barrels in 2023, primarily due to unscheduled maintenance, repair work, and oil theft. Oil theft and sabotage alone resulted in the loss of 5.25 million barrels in 2023, exacerbating the country’s struggles with crude output.
Despite government efforts to curb these issues, such as initiatives to reduce theft and operational inefficiencies, progress has been slow. Recently, the House of Representatives Special Joint Committee instructed NNPCL to halt further crude-for-loan agreements amid reports that the national oil company was planning to borrow an additional $2 billion through similar deals.
NNPCL Group Chief Executive Officer Mele Kyari confirmed ongoing discussions for another oil-backed loan to boost the company’s finances, with plans to secure the loan using 30,000 to 35,000 bpd of crude production.
Nigeria’s economy remains heavily dependent on oil exports, which provide much-needed foreign exchange reserves. However, a combination of oil theft, underinvestment in infrastructure, and the cost of fuel subsidies has severely strained the country’s finances.
President Bola Tinubu has been working to implement key reforms, such as eliminating fuel subsidies and allowing the naira to trade closer to market levels, but these changes have placed additional pressure on the country’s cost of living.
In August 2023, NNPCL secured a $3.3 billion emergency loan from Afreximbank to help stabilize Nigeria’s foreign exchange reserves, further demonstrating the financial challenges faced by the national oil company.
Despite these financial maneuvers, Nigeria continues to face significant hurdles in reviving its oil industry and ensuring long-term economic stability.
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