Afreximbank arranged a $3.3 billion loan sponsored by the NNPC, meant to help Nigeria pay for crude oil purchases.
The African Export-Import Bank (Afreximbank) said it has released $2.25 billion to Nigeria under a $3.3 billion syndicated credit facility sponsored by the Nigerian National Petroleum Co. Ltd.
“This landmark financing is Nigeria’s largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023”, the Cairo-based bank said in a recent press release.
Reuters reported October 9 citing NNPC chief executive Mele Kyari that the national oil and gas company has again become the only importer of petrol because private firms could not obtain foreign currency. In June Kyari told the news organization NNPC has started paying cash for gasoline imports in lieu of crude swap contracts.
NNPC had been repaying gasoline imported from consortiums of foreign and local trading firms through crude oil under so-called direct sale direct purchase contracts since 2016 because the company did not have enough cash to pay for petroleum imports, Reuters said June 4 citing “data and trading sources”.
In his inaugural address May 29, President Bola Ahmed Tinubu announced an end to the country’s fuel subsidy as part of efforts to lighten financial burdens on the government.
“The disbursement of the initial US$ 2.25 billion under the facility will support Nigeria’s long-term economic stability, ease access to import financing for raw materials and essential goods, support Industrialization and trade development efforts”, Afreximbank president and board Benedict Oramah said in a statement.
Kyari said that “the proceeds of the facility have been made available to the Federal Republic of Nigeria as one of several efforts towards improving macro-economic stability”.
The remaining $1.05 million under the five-year facility “is expected to be disbursed subsequently”, the Afreximbank statement said.
Besides Afreximbank, the backers of the loan include Gunvor International BV, a Geneva-based energy and commodities trading company, and Sahara Energy Resources Ltd., an energy and infrastructure conglomerate.
“Investors were keen to consider ticket sizes of US$250 million and US$500 million amidst current headwinds and year-end pressures in the loan markets”, Afreximbank said of the loan.
“The 5-year facility carries a margin of 6.0 percent per annum above the 3-month secured overnight financing rate. The transaction structure has an embedded price balance mechanism where 90 percent of all excess cash from the sale of the committed barrels (after debt service) will be released while the balance of 10 percent will be used to prepay the facility, effectively shortening the final maturity of the facility and freeing cashflow from future pledged cargoes for use by Nigeria”.
On Thursday the Central Bank of Nigeria (CBN) said it had paid $2 billion in foreign exchange liabilities across various sectors including petroleum, aviation and manufacturing.
“The Bank has also cleared up the entire liability of 14 banks and started settlements with foreign airlines”, it said in a statement on social media platform X.
CBN acting director for corporate communications Hakama Sidi Ali said CBN would continue to settle foreign exchange backlogs as it has done over the last three months.