To sustain its operations, the Nigerian National Petroleum Company (NNPC) Limited pledged a substantial volume of the country’s crude oil to secure nearly $6 billion in loans over a three-year period. These crude-backed loans, drawn from four separate agreements, were secured between 2020 and 2023, during which Nigeria’s crude oil production dropped from 1.49 million barrels per day (bpd) to 1.31 million bpd.
Here are the details of the agreements.
- NNPC secured around $6 billion in loans by using Nigeria’s crude oil as collateral over three years, with plans for an additional $2 billion loan.
- These crude-backed loans occurred during a period of declining oil production, from 1.49 million bpd in 2020 to 1.31 million bpd in 2023.
- Project Gazelle: A $3 billion loan from Afreximbank pledged 164.25 million barrels of crude oil for repayment starting in 2024.
- The loan from Project Gazelle will be repaid via 90,000 barrels of crude per day through a special-purpose vehicle, Project Gazelle Funding Ltd.
- The deal includes an interest rate of 11.8%, with additional margins and premiums pushing total costs higher.
- Project Bison: In September 2021, NNPC funded a 20% stake in the Dangote Refinery with a $1.036 billion forward sale agreement, supplying 35,000 bpd of crude.
- NNPC has paid $625 million toward the Dangote Refinery loan, but $424 million remains outstanding.
- Project Eagle: A $1.5 billion prepayment loan from Eagle Export Financing, with repayments starting in 2020 using 1.8 million barrels per delivery period.
- The Project Eagle loan supports critical investments in NNPC’s production capacity and broader economic impacts, financed by multiple banks and oil trading firms.
- Project Eagle Subsequent: Additional crude-backed pre-export finance loans (PXF1 and PXF2) totaling $159 million were refinanced through another forward sale of $694 million in crude oil.
- New $2 Billion Loan: NNPC is currently negotiating for a new loan secured by 30,000-35,000 bpd of crude, to support its business operations and growth.
- The new loan aims to maintain regular business activities and stabilise cash flow for NNPC without affecting gasoline payments, according to NNPC GCEO Mele Kyari.
- Stakeholders express concern that the crude-backed loans will negatively impact Nigeria’s oil output, petrol availability, and foreign reserves.
- Reduced crude oil production, combined with barrels set aside for loan repayments, can further strain Nigeria’s export capacity and domestic supply obligations.
- Critics argue that the forward sale agreements may limit Nigeria’s flexibility to capitalise on potential future increases in crude prices.
- These loans, while a common commercial practice, pose risks of reducing revenue in the foreign reserves due to debt repayment commitments.