The federal government of Nigeria is planning to secure an additional $2 billion in crude oil-backed loans from international creditors to enhance its financial inflows. Reuters reported on Tuesday, citing two sources familiar with the matter, that the Nigerian National Petroleum Corporation (NNPC) is in discussions with international creditors to arrange this credit facility.
Mele Kyari, the Group Chief Executive Officer (GCEO) of NNPC, confirmed the talks with international creditors to raise an oil-backed credit facility. This development comes amid NNPC’s ongoing struggle to clear a $6 billion backlog owed to international oil traders following the removal of subsidies. Kyari noted that the proposed credit facility would help bolster NNPC’s finances and enable further investment in the oil and gas sector.
Kyari did not disclose the specific international financial institutions involved or the exact amount being negotiated but stated that the funds would support all of NNPC’s business activities, including production growth. He emphasized that the credit facility is not a desperate measure but a standard business practice to ensure the company’s operations continue smoothly.
“We have no problem covering our gasoline payments. This is just money for normal business and not a desperate act,” Kyari explained. “It will be a syndication with critical but regular partners who have been in business with our company to forward the cash.”
NNPC already holds a $3.3 billion oil-backed loan from Afreximbank, secured in August 2023, to improve liquidity following the removal of the fuel subsidy and the unification of the forex market, which had weakened the naira. This loan, tied to crude oil priced at $65 per barrel, allocated around 90,000 barrels of crude oil for repayment purposes. Despite this, NNPC’s financial challenges have been exacerbated by increasing fuel subsidy costs, according to five sources.
The new $2 billion loan under discussion is deemed essential for NNPC to manage and address these rising subsidy expenses effectively.
Credit : Nairametrics