Project Eagle: Nigeria Used  Oil as Collateral to Borrow $1.5bn Loan from Traders

The Federal Government through the Nigerian National Petroleum Corporation (NNPC) has signed a $1.5 billion prepayment loan deal led by Standard Chartered and backed by Vitol Group and Matrix Energy, two oil traders.

According to Reuters, the deal will provide Nigeria with necessary cash to mitigate some of the negative impacts of COVID-19 on the economy and further productivity in Africa’s largest economy.

The deal, according to Reuters’ sources, is called Project Eagle and also backed by the African Export Import Bank and the United Bank for Africa.

Vitol Group and Matrix Energy will each be taking 15,000 barrels of crude oil per day as repayment for the next five years. This was confirmed by Matrix Energy, a Nigerian owned energy company.

Prepayments with traders are widely used in commodity finance as banks consider them to be one of the more secure forms of lending in countries viewed as risky.

Nigeria continues to seek alternative to its weak foreign revenue and dwindling foreign reserves following over 60 percent fall in global oil prices due to COVID-19 pandemic.

However, experts have said rising debt amid weak revenue generation will continue to hurt the nation’s ability to grow and recover from COVID-19. The nation’s debt service to revenue ratio stood at 99 percent as at the end of June 2020, according to the Debt Management Office.

Last week, the International Monetary Fund said Nigeria should focus on improving tax collection efficiency so it can simultaneously service its debt and grow the economy.