The Nigerian National Petroleum Company Limited, on Wednesday, announced that it had secured a $3bn emergency crude oil repayment loan from the African Export-Import Bank.
It said the loan would be used by the oil company to support the Federal Government in stabilizing Nigeria’s exchange rate. It was also gathered that the facility would also help in reducing the pump price of Premium Motor Spirit, popularly called petrol.
Impeccable sources at the oil firm also told our correspondent that the loan would boost the imports of petrol into Nigeria, as oil marketers further confirmed that the facility would tackle the seeming re-emergence of subsidy on petrol.
Nigeria’s exchange rate has been an issue of concern lately, with the dollar rising to over N910 at the parallel market, while oil dealers have been complaining of non-liquid nature of the Importers’ and Exporters official window of the Central Bank of Nigeria.
The NNPCL announced the acquisition of the $3bn loan in a brief statement issued by the company in Abuja, which was titled, ‘Relief for the naira: NNPC Ltd secures $3bn emergency crude repayment loan from AFREXIM Bank.’
The statement read, “The NNPC Ltd and @afreximbank have jointly signed a commitment letter and term-sheet for an emergency $3bn crude oil repayment loan.
“The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.”
Providing further explanation about the loan, the Senior Special Assistant to President on Digital/New Media, O’tega Ogra, in several posts on X (formerly Twitter), explained that the $3bn was not a crude-for-refined products swap loan, but an upfront cash loan against proceeds from a limited amount of future crude oil production.
He said, “Is this loan risky for NNPCL or the Nigerian Treasury? No. The exposure for NNPCL is very limited, covering just a fraction of their entitlements. Additionally, there are no sovereign guarantees tied to this loan.
“What’s the benefit of this loan to Nigeria? The loan will assist NNPCL in settling taxes and royalties in advance. It will also equip the Federal Government with the necessary dollar liquidity to stabilize the naira, with limited risk.
“How will the loan be disbursed? The funds will be released in stages or tranches based on the specific needs and requirements of the Federal Government.”
On whether the initiative would affect fuel prices, Ogra said, “A strengthened naira as a result of this initiative will lead to a reduction in fuel costs. This means that if the naira appreciates in value, the cost of fuel will drop and further increases will be halted.”
He continued, “What about subsidies? Are they coming back? No. A stronger naira will result in lower prices from the current level, making subsidies unnecessary. The deregulation policy remains unchanged.
“How will the loan be repaid? The loan will be repaid against a fraction of proceeds from future crude oil production. It’s a strategic move that ensures a balance between our current economic needs and future production capabilities.
“What is the difference between this and previous swap deals? This is not a crude for refined products agreement where the government does not earn any proceeds from the swap.”
