Nigeria’s state-owned oil company, the Nigerian National Petroleum Company (NNPC), is considering securing a new $2 billion loan using crude oil pre-payments as collateral.
Nigeria’s government finances rely on the oil the NNPC exports and oil provides the bulk of crucial foreign exchange reserves.
But pipeline theft, and years of underinvestment, have sapped oil production in recent years, and the cost of gasoline subsidies has further depleted cash reserves.
President Bola Tinubu has been struggling to push through reforms in Africa’s biggest oil exporter – including eliminating fuel subsidies and allowing the naira currency to trade close to market levels – without pushing the country’s population to a cost-of-living breaking point.
NNPC chief Mele Kyari confirmed the company wanted a loan against 30,000-35,000 barrels per day of crude production, but declined to say how much money it sought. He said the cash raised would be used for all of the NNPC’s business activities, including supporting production growth.
“We have no problem covering our gasoline payments. This is just money for normal business and not a desperate act,” Kyari told Reuters.
“It will be a syndication with critical but regular partners who have been in business with our company to forward the cash,” he said, adding he expected to conclude the deal in the next two months.
Recall that the NNPC owes around $6 billion to international traders for imported petrol as traders said the state-owned company is taking more days to make payment instead of within 90 days.
According to Reuters, NNPC’s mounting debt, which includes overdue payments exceeding $4 billion-$5 billion for January imports alone as several international petrol suppliers have ceased participating in recent tenders.
All five sources who spoke to Reuters asked not to be named because they were not authorised to speak on the issue.
“It will be a syndication with critical but regular partners who have been in business with our company to forward the cash,” Kyari said on Tuesday adding he expected to conclude the deal in the next two months.
On August 16, 2023, the Nigerian National Petroleum Company (NNPC) Limited secured a $3.3 billion emergency crude repayment loan — a transaction aimed at supporting the naira and stabilising the foreign exchange (FX) market.
Arranged by the African Export-Import Bank (Afreximbank), the $3.3 billion crude-for-cash loan was also targeted at supporting the federal government’s monetary and fiscal reforms.