NNPC seeks fresh $2bn crude-backed loan

The Nigerian National Petroleum Company (NNPC) Ltd is actively pursuing a new $2 billion loan in Europe, as reported by TheCable.

This loan, to be repaid with 35,000 barrels of oil per day, aims to bolster the firm’s operations, according to insiders.

Mele Kyari, NNPC’s Group Chief Executive Officer, has been in discussions to secure this oil-backed loan. Given NNPC’s limited share of Nigeria’s oil production, this arrangement could significantly impact the company’s available resources.

The NNPC has a commitment to supply crude to the Dangote refinery, payable in naira.

Nigeria’s current oil output is estimated at 1.3 million barrels per day, but due to production sharing contracts governing offshore drilling, the nation’s actual share is less than half.

A substantial portion of Nigeria’s oil is already allocated to various loans and crude swap deals to import petrol, which is sold domestically at around N700 per litre, despite a landing cost exceeding N1,000 per litre. The NNPC has repeatedly denied continuing fuel subsidies.

Top NNPC officials are currently in Europe seeking the loans, primarily targeting Standard Chartered Bank in the UK, although progress has been limited so far.

The Afreximbank Agreement
This recent loan pursuit is not unprecedented. In August 2023, NNPC secured a $3 billion crude-backed loan from the African Export-Import Bank (Afreximbank) to support the naira and stabilize the foreign exchange market. The repayment involves 164.25 million barrels of crude oil, or 90,000 barrels per day, through Project Gazelle Funding Ltd, an SPV based in the Bahamas. Afreximbank disbursed $2.25 billion in January and an additional $925 million in June.

Dangote Refinery and Industry Disputes
Recently, tensions have risen between the Dangote refinery and industry regulators, capturing the attention of stakeholders. The refinery faced challenges sourcing local crude but has now been prioritized by NNPC to receive it, potentially saving Nigeria over $610 million monthly in fuel import costs, as stated by Zach Adedeji, chairman of the Federal Inland Revenue Service.

On July 22, Aliko Dangote, chairman of the refinery, accused NNPC officials, oil traders, and terminals of having a blending plant in Malta. This facility allegedly blends re-refined oil with additives to create lubricants but does not refine oil.

In response, Mele Kyari denied owning a blending plant in Malta or knowing any NNPC employee involved in such activities. The House of Representatives’ joint committee on petroleum resources is investigating several claims, including the production of substandard products by local refineries.