FG plans to borrow another $2 billion crude oil-backed loan to boost economy – Report  

The federal government is planning to borrow an additional $2 billion in crude oil-backed loans from international creditors to boost its financial inflow.

Reuters reported that two sources familiar with the matter confirmed the details on Tuesday.

In addition, Mele Kyari, the Group Chief Executive Officer (GCEO) of the Nigerian National Petroleum Corporation (NNPC), informed Reuters that the national oil company is in discussions with international creditors to raise an oil-backed credit facility.

This follows the recent revelation that NNPC is struggling to pay international oil traders a backlog of $6 billion amid subsidy removal.

Kyari said the credit facility will help to boost its finances and allow investment in the oil and gas sector.

However, the GCEO did not disclose the international financial body with which NNPC is in talks, nor the amount it is planning to raise from the transaction.

He did mention that the cash raised would be used for all of NNPC’s business activities, including supporting production growth.

“We have no problem covering our gasoline payments. This is just money for normal business and not a desperate act.  

“It will be a syndication with critical but regular partners who have been in business with our company to forward the cash,” Kyari said.  

Afreximbank’s $3.3 billion loan is not sufficient 

NNPC already holds a $3.3 billion oil-backed loan from Afreximbank.  

In August 2023, following the removal of fuel subsidy and the unification of the forex market which significantly weakened the naira, the federal government through the NNPCL secured a $3.3 billion loan from Afrexim bank to shore up liquidity in the market. 

Kyari explained then that the loan would be used to shore up the foreign exchange reserve and provides a more urgent solution to the country’s FX challenges. 

The loan is said to be paid with crude oil set a $65 per barrel and had earmarked around 90,000 barrels of crude oil for the process. 

However, five sources have indicated that the company’s financial challenges have been exacerbated by increasing fuel subsidy costs.  

This new $2 billion loan, currently under discussion, is seen as crucial for NNPC to manage and pay off these rising subsidy expenses, according to these sources. 

NNPC $6 billion debt to oil traders 

Nairametrics earlier reported that NNPC owes $6 billion to international oil suppliers, leading some traders to withdraw their refined products. 

The cap on fuel prices following the removal of subsidy resulted in stability at the pump despite increases in international crude oil prices and the devaluation of the naira against the dollar.  

However, maintaining price stability means NNPC has to pay more to cover the landing cost of the petrol it purchases, increasing the financial burden on the oil firm. 

While NNPC repeatedly denied such debt to oil traders; sources familiar with the matter confirmed the details of the credit from the buyers.  

The company has yet to pay for some January imports, with traders stating that the late payments now amount to between $4 billion and $5 billion.   

Under the terms of their contracts, NNPC is required to pay within 90 days of delivery. 

What you should know 

Nigeria’s oil and gas sector, the primary revenue source for the federal government, faces significant underinvestment.  

Many major oil companies are reluctant to explore the country’s shores due to oil theft and a hostile economic climate. 

In May, the CEO of TotalEnergies, Patrick Pouyanne, revealed that his company had to redirect a $6 billion deal to Angola instead of Nigeria due to these issues. 

Furthermore, the federal government, particularly the upstream sector, has struggled to increase crude oil production to an estimated 2 million barrels per day.  

This shortfall hinders the country’s ability to leverage international oil prices and secure sufficient foreign exchange earnings. 



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