By Stephanie Odiase
The Nigerian National Petroleum Corporation Limited (NNPCL) has provided more details about the $3billion emergency crude repayment loan it secured from Afriexim Bank on Wednesday.
The Company provided the update following the confusion created by a scanty statement, lacking in details, it issued on Wednesday informing the public of the said loan.
The statement released on its verified social media handles with the subject: Relief for the Naira: NNPC Ltd secures $3billion emergency crude repayment loan from AFREXIM Bank, simply read “The NNPC Ltd. and African Export-Import Bank (Afreximbank) have jointly signed a commitment letter and Termsheet for an emergency $3billion crude oil repayment loan.
“The signing, which took place today (Wednesday) 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.”
However, providing more details following concerns from the public, the Company clarified that the said facility is not a crude-for-refined product swap but an upfront cash loan against proceeds from a limited amount of future crude oil production.
It also stated that the loan is not risky for NNPCL or the Nigerian Treasury, adding that the exposure for NNPCL is very limited, covering just a fraction of their entitlements with no sovereign guarantees tied to the loan.
The company explained that rather, the loan will benefit Nigeria by assisting the 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,” the statement added.
Extractive360 reports that the funds will be released in stages or tranches based on the specific needs and requirements of the Federal Government, resulting in a strengthened Naira and 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,” the NNPCL said.
On speculations that fuel subsidy may return, the Company clarified that there is no plan to reinstate subsidy payments, stating categorically that the deregulation policy remains unchanged. Rather, it said a stronger Naira will result in lower prices from the current level, making subsidies unnecessary.
On the loan repayment, the Company said 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,” the statement added.