The Nigerian National Petroleum Company Limited (NNPC) is negotiating a new oil-backed loan of at least $2 billion to enhance its financial position and support its operations, confirmed Group Chief Executive Officer Mele Kyari. This follows a $3.3 billion emergency crude oil repayment loan secured from the African Export-Import Bank (Afreximbank) in August 2023.
With the new proposed loan, NNPC's total crude-backed borrowing would rise to $5.3 billion. Kyari disclosed that the loan would be secured against 30,000-35,000 barrels per day of crude production, but did not specify the total amount being sought.
The announcement coincides with ongoing fuel shortages in Abuja, Lagos, and neighboring states, attributed to NNPC's supply constraints as the sole importer of Premium Motor Spirit (PMS). Marketers have expressed concerns about the potential impact of crude-backed loans on the sector, emphasizing the need for cautious financial management.
Additionally, NNPC's debts to petrol suppliers have reportedly doubled to $6 billion over the past four months, a claim denied by NNPC spokesperson Olufemi Soneye, who challenged the veracity of these reports.
Nigeria's reliance on oil exports for foreign exchange reserves has been challenged by pipeline theft, underinvestment, and the high cost of fuel subsidies. President Bola Tinubu is striving to implement reforms, including removing fuel subsidies and allowing the naira to trade at market levels, without exacerbating the cost-of-living crisis.
The proposed loan aims to support NNPC's business activities and production growth. Kyari emphasized that the loan is for routine business operations, not a desperate measure, and expects to finalize the deal within two months.
NNPC's earlier $3.3 billion loan from Afreximbank, arranged to stabilize Nigeria’s exchange rate, is part of broader efforts to address financial challenges. The oil firm has earmarked 90,000 barrels of crude to ensure repayment stability, using a conservative price benchmark of $65 per barrel to mitigate future price fluctuations.
The new loan discussions come as Nigeria faces mounting pressure to adjust pump prices due to economic realities and global oil price increases, with the government cautious about potential public backlash. The 650,000-barrel-per-day Dangote refinery near Lagos, expected to begin gasoline production soon, faces its own financial constraints, further complicating the fuel supply landscape.
Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) President Billy Gillis-Harry acknowledged NNPC's efforts to address the fuel supply issues and urged prudent financial planning for the proposed loan to ensure long-term sector benefits.
