Afreximbank Disburses $2.25 Billion to NNPC in Historic Crude Oil Prepayment Deal – Boosting Nigeria’s Economic Stability
In a significant financial development, the African Export-Import Bank (Afreximbank), Africa’s leading multilateral trade finance institution, has officially disbursed an initial sum of $2.25 billion to the Nigerian National Petroleum Company Limited (NNPC). This follows NNPC’s announcement in August 2023 about securing a crucial $3 billion crude repayment loan aimed at stabilizing the Naira against the dollar in the foreign exchange market.
The funding arrangement, finalized at Afreximbank’s headquarters in Cairo, Egypt, has garnered attention as one of Nigeria’s most extensive crude oil prepayment facilities and stands out as one of the largest syndicated loans raised in Africa in 2023.
After reaching out to oil traders in September 2023 for their interest in funding a $3 billion loan to NNPC, Afreximbank is now set to disburse a second tranche of $1.05 billion, bringing the total financial injection to $3.3 billion.
Investors participating in this landmark financing deal expressed interest in ticket sizes ranging from $250 million to $500 million, navigating challenges in the loan markets amidst current economic headwinds. The 5-year facility carries a margin of 6.0 percent per annum above the 3-month secured overnight financing rate (SOFR).
The transaction’s unique structure incorporates a price balance mechanism, releasing 90 percent of all excess cash from the sale of committed barrels (after debt service). This cash will be utilized, while the remaining 10 percent will be employed to prepay the facility, effectively shortening its final maturity and freeing cash flow from future pledged cargoes for Nigeria’s use.
Key participants in this financing initiative include Afreximbank, Gunvor International BV, a Geneva-based multinational energy and commodities trading company, and Sahara Energy Resources Limited, an African-owned international energy and infrastructure conglomerate.
In a statement provided to Majorwaves on Friday, Afreximbank highlighted its role as the Sole Mandated Lead Arranger, Technical and Modeling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent, and Collateral Agent. United Bank for Africa Plc (“UBA”) served as the Local Arranger and Onshore Account Bank.
Afreximbank President and Chairman of the Board of Directors, Prof. Benedict Oramah, expressed satisfaction with the successful financial close, stating that this facility demonstrates the bank’s commitment to supporting African economies in challenging times. He emphasized that the disbursement of the initial $2.25 billion would contribute to Nigeria’s long-term economic stability, facilitate import financing for raw materials, support industrialization, and foster trade development.
NNPC Limited’s Group Chief Executive Officer, Mele Kyari, acknowledged the positive impact of the facility, emphasizing that the proceeds are aimed at improving macro-economic stability in the Federal Republic of Nigeria. Oliver Alawuba, the Group Managing Director/CEO of UBA, echoed the bank’s delight in participating, underlining their commitment to providing essential interventions and solutions for addressing economic challenges in Nigeria.
