The Nigerian National Petroleum Company (NNPC) is exploring the option of securing a $2 billion loan using crude oil pre-payments as collateral.
Mele Kyari, the group’s general manager, revealed that the company is seeking a loan against 30,000-35,000 barrels per day of crude production.
However, he did not disclose the exact amount of money NNPC aims to raise.
“We have no problem covering our gasoline payments. This is just money for normal business and not a desperate act,” Kyari told Reuters.
The funds raised from this loan are intended to support all of NNPC’s business activities, including boosting production growth.
Despite the assurance of financial stability, NNPC’s financial situation has raised eyebrows, with the company reportedly owing around $6 billion to international traders for imported petrol.
These traders have indicated that NNPC is taking longer to make payments, exceeding the typical 90-day window.
Further complicating matters, NNPC’s debt includes overdue payments ranging from $4 billion to $5 billion for January imports alone.
This has led several international petrol suppliers to withdraw from recent tenders.
Kyari remains optimistic, stating that the loan will be a syndication with regular partners who have longstanding business relationships with NNPC.
He anticipates concluding the deal within the next two months.
The identity of the lender remains uncertain, with sources indicating that the African Export-Import Bank (Afreximbank) may be unable to extend its exposure to Nigeria to the desired level.
Efforts to get confirmation from Olufemi Soneye, NNPC’s chief corporate communications officer, regarding the new oil-backed loan proved unsuccessful.
This potential $2 billion loan follows NNPC’s recent $3.3 billion emergency crude repayment loan secured on August 16, 2023.
Arranged by Afreximbank, the loan was aimed at supporting the naira and stabilizing the foreign exchange market. It also intended to back the federal government’s monetary and fiscal reforms.
NNPC’s pursuit of the new loan underscores the challenges facing Nigeria’s oil sector, which has been grappling with fluctuating oil prices, operational inefficiencies, and financial mismanagement.
As the company seeks to bolster its finances, the outcome of this loan negotiation could have significant implications for the country’s economic stability and its energy sector’s future.
The oil-backed loan strategy reflects NNPC’s broader efforts to leverage its crude production capacity to secure necessary funding.
However, the increasing debt levels and delayed payments to international traders highlight the pressing need for comprehensive reforms and efficient management within Nigeria’s oil industry.
