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By Adewale Sanyaolu
Barring any last minute change in plans, Nigeria is to receive a $1 billion loan from the African Export-Import Bank (Afreximbank) next month as part of a larger crude oil prepayment facility aimed at shoring up forex reserves and boosting the economy.
The funds are part of a larger, $3.3 billion, crude oil prepayment facility, sponsored by the Nigerian National Petroleum Company Limited (NNPCL). An initial disbursement of $2.25 billion was made by Afreximbank in January, and a second tranche of US$1.05 billion was expected to be disbursed subsequently.
“The verification of the crude availability has happened so we expect in the next month to finalize the release of the balance,” Denys Denya, senior executive vice president for finance, administration, and banking at Afreximbank, told Bloomberg.
“Based on future production, you get the money now.”
The top oil producer in Africa will repay the loan using proceeds from sales of crude by the Nigerian National Petroleum Company.
In January, Afreximbank said, “This landmark financing is the largest syndicated loan ever raised by Nigeria in the International market and one of the largest syndicated debts raised in Africa in recent years.”
Nigeria missed out on the oil price boom in 2022 as it was struggling to boost its production while oil prices were above $100 per barrel. The country has been grappling for years with a shortage of foreign currency and a lack of economic diversification away from crude oil exports.
At the time of the first batch of loan disbursement, NNPCL Group Chief Executive Officer, Mele Kolo 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 participation of global, international and regional syndication firms is a further testament to the lending market’s appetite for financing sponsored by NNPCL and signifies solid market confidence in Nigeria,” Kyari added.
Nigeria will pay an interest of 11.85 percent per annum on the $3.3 billion “pre-export finance facility” (PxF) facilitated by the Nigerian National Petroleum Company (NNPC) Ltd and arranged by Afrexim Bank.
Until now, the fine details of the transaction, which has a five-year tenor, had been withheld by all parties involved.
In the details of the deal, Nigeria pledged a total of 164.25 million barrels of crude oil — at 90,000 barrels per day — starting from 2024 to repay the loan through Project Gazelle Funding Limited.
Effectively, the NNPC has pledged 38.58 percent of five years’ worth of tax and royalty oil to secure the loan.
At the beginning of 2024, a barrel of Nigerian oil was sold at the international market for $77.93 per barrel, according to the Central Bank of Nigeria (CBN) data.
At the current price, the 164.25 million barrels of oil pledged by Nigeria equals $12.8 billion — about three times more than the facility taken.
Officially, Project Gazelle Funding Ltd (PGFL) is the borrower while the NNPC is the “sponsor” and will pay with oil to the SPV to liquidate the loan.
To make the repayment, the NNPC will forward-sell 90,000 barrels per day of Nigeria’s share of offshore crude oil under the production sharing contract (PSCs) with the oil companies.
