Afrexim Bank has announced the disbursement of $925 million- another tranche of the $3.3 billion crude oil-backed loan agreement it entered into with the NNPC last year.
The bank disclosed this in a statement on its website stating that the current disbursement brings the total payment for the facility to $3.175 billion.
The bank explained that the current payment was raised from crude oil off-takers like Oando Group and Sahara Energy as well as others.
It stated, “African Export-Import Bank (Afreximbank) has announced an additional disbursement of US$925 million under the syndicated US$3.3 billion crude oil-backed prepayment facility sponsored by the Nigerian National Petroleum Company (NNPC) Limited. This brings the total current funded facility size to US$ 3.175 billion.
“Arranged and coordinated by Afreximbank, the accordion arrangement saw the raising of a combined total of US$925 million from a consortium of crude oil off-taker lenders including but not limited to the Oando Group and Sahara Energy Resource Limited.”
The bank had earlier disbursed around $2.15 billion to the federal government in December.
The President and Chairman of the bank, Prof. Kennedy Oramah described the original facility as a ‘landmark,’ noting it as the largest crude oil-backed facility in Nigeria and one of the largest syndicated debts raised in Africa. He added that the successful closure of the first accordion highlighted the strong market appetite for well-structured commodities-backed instruments.
Background
Following the unification of the FX market in June and the subsequent depreciation of the naira, the federal government through the NNPC secured the $3.3 billion crude oil-backed loan facility from the African Export-Import Bank (Afrexim Bank).
The National Economic Council (NEC) had explained last year that it was confident the loan would help stabilise the forex market in light of the severe volatility then. Although that is yet to materialise.
However, to quell the heated controversy surrounding the deal, the NNPC explained the structure of the deal dubbed Project Gazelle saying such projects are common and provide a short-term solution to forex liquidity problems.
Furthermore, it explained that it adopted a benchmark oil price of $65 per barrel for repaying the loan, using this figure to shield the repayment plan from the fluctuations of the international oil market and around 90 thousand barrels have been earmarked to ensure it does not hurt earnings from future oil sales in the country.
In December, multiple reports confirmed that the federal government received the first tranche of the loan, amounting to $2.5 billion, with local bank UBA acting as the arranger.
