The Nigerian National Petroleum Company Limited (NNPCL) has committed to pledging 272,500 barrels of crude oil per day through various crude-for-loan agreements totaling $8.86 billion. This translates to approximately 8.17 million barrels being allocated monthly to service these loans.
According to an analysis by the Nigeria Extractive Industries Transparency Initiative (NEITI) alongside NNPCL’s financial statements, the company has already repaid $2.61 billion, representing 29.4% of the total debt, while $6.25 billion remains outstanding. Out of the total credit facility, only about $6.97 billion has been drawn from seven crude-for-loan arrangements.
Key projects under these agreements include Project Panther, Project Bison, Project Eagle Export Funding, Project Yield, and Project Gazelle. Among them, Project Panther is a joint venture with Chevron Nigeria Limited, backed by both local and international banks. This project secured a $1.4 billion loan facility, with 23,500 barrels per day pledged for repayment.
Project Bison is linked to NNPCL’s attempt to acquire a 20% stake in the Dangote refinery, ultimately securing a 7.25% equity stake. It received a $1.04 billion loan from Afrexim Bank, backed by 35,000 barrels per day.
Project Eagle Export Funding consists of three separate loans aimed at fulfilling various financial commitments. The original loan of $935 million, secured in 2020, was fully repaid by September 2023, while a subsequent loan of $635 million was also cleared in the same timeframe. The third tranche, a $900 million loan secured in 2023, has 21,000 barrels per day pledged, with repayments set to begin in June 2024.
Another significant initiative, Project Yield, aims to support the Port Harcourt Refining Company with a $950 million loan backed by 67,000 barrels per day. Repayments for this facility are scheduled to commence in December.
Despite these crude-for-loan arrangements, fuel production at the Port Harcourt refinery has not yet started, facing multiple delays. NNPCL’s commitments to enhance domestic refining capacity have repeatedly fallen short.
Recently, the Project Gazelle deal was established to stabilize Nigeria’s foreign exchange market, with a $3 billion forward sale agreement secured in December 2023, pledging 90,000 barrels per day from Production Sharing Contract assets.
As Nigeria grapples with declining oil production, the NEITI’s 2022-2023 report highlighted a significant drop in output, marking the lowest levels in a decade. Although production improved to 537.57 million barrels in 2023, this still represents only 67.16% of the country’s peak capacity.
Challenges such as production deferments, oil theft, and operational inefficiencies have compounded the situation. NEITI reported a loss of 5.25 million barrels due to theft and sabotage in 2023.
In light of these ongoing issues, the House of Representatives Special Joint Committee has directed NNPCL to cease further crude-for-loan agreements. This directive follows reports of plans for an additional $2 billion in oil-backed loans to address a $6 billion backlog owed to international traders, particularly in the wake of the recent removal of fuel subsidies.
NNPCL’s Group Chief Executive Officer, Mele Kyari, mentioned the company’s intent to secure a new loan against 30,000 to 35,000 barrels per day of crude production, although he refrained from disclosing the exact amount sought.
As Nigeria’s economy heavily relies on oil exports for essential foreign exchange, the challenges posed by pipeline theft and underinvestment continue to hinder production. President Bola Tinubu is working to implement reforms in the oil sector, including phasing out fuel subsidies and allowing the naira to trade closer to market levels, all while striving to avoid exacerbating the cost-of-living crisis.
In a prior announcement, NNPCL disclosed securing a $3.3 billion emergency crude oil repayment loan from the African Export-Import Bank, aimed at supporting the Federal Government in stabilizing Nigeria’s exchange rate.
