African Export-Import Bank (Afreximbank) has announced an initial disbursement of US$2.25 billion of the syndicated US$3.3 billion crude oil prepayment facility sponsored by the Nigerian National Petroleum Company (NNPC) Limited.
Afreximbank in a statement on Friday said, “a second tranche of US$1.05 billion is expected to be disbursed subsequently”.
NNPCL said, the facility will enable it to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.
However, experts are afraid of the security of the loan. They said, if the security of the loan is some barrels of future crude oil production, at what forward contract price has this been negotiated? In view of the fact that all proceeds of crude oil sales are paid into the federation account, adding that this sort of swap transaction has implications for Federation Account Allocation Committee (FAAC) receipts meant for the three tiers of government.
The landmark financing is Nigeria’s largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023.
Investors were keen to consider ticket sizes of US$250 million and US$500 million amidst current headwinds and year-end pressures in the loan markets.
The 5-year facility carries a margin of 6.0% per annum above the 3-month secured overnight financing rate (SOFR).
The transaction structure has an embedded price balance mechanism where 90% of all excess cash from the sale of the committed barrels (after debt service) will be released while the balance of 10% will be used to repay the facility, effectively shortening the final maturity of the facility and freeing cash flow from future pledged cargoes for use by Nigeria.
The initial participating lenders are Afreximbank, Africa’s multilateral trade finance institution, Gunvor International BV, a Geneva-based multinational energy and commodities trading company, and Sahara Energy Resources Limited, an African-owned, leading international energy and infrastructure conglomerate.
Afreximbank’s extensive structuring and technical experience in arranging similar complex oil & gas financing facilities in Angola, Republic of Congo, South Sudan, Chad Egypt, Cote d’Ivoire. Ghana, etc. was brought to bear in the successful closure of the facility, notwithstanding a very challenging market environment.
The Bank acted as the Sole Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent, and Collateral Agent, while United Bank for Africa Plc (“UBA”) acted as the Local Arranger and Onshore Account Bank.
While lauding the successful financial close, Afreximbank President and Chairman of the Board of Directors, Prof. Benedict Oramah, explained that “this facility further demonstrates the Bank’s commitment to supporting African economies when such assistance is most needed.
“Afreximbank stands by its member countries in good and in difficult times. The disbursement of the initial US$ 2.25 billion under the facility will support Nigeria’s long-term economic stability, ease access to import financing for raw materials and essential goods, support Industrialization and trade development efforts.
“We are pleased that despite the typical year-end encumbrances, our partners and investors rallied and raised the funds required in record time. We thank them for their support”.
The NNPCL Group Chief Executive Officer, Mr. Mele Kolo Kyari, commented on this landmark transaction, noting that “the proceeds of the facility have been made available to the Federal Republic of Nigeria as one of several efforts towards improving macro-economic stability.
“The participation of global, international, and regional syndication firms is a further testament to the lending market’s appetite for financing sponsored by NNPCL and signifies solid market confidence in Nigeria.”
The Group Managing Director/CEO, United Bank for Africa (UBA), Oliver Alawuba said, “UBA is delighted to participate in this transaction which accentuates its commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria”.
