NNPC Gets Afreximbank $3bn Emergency Loan for Naira Stability

By Adedapo Adesanya

The Nigerian National Petroleum Company (NNPC) Limited and Africa Export-Import Bank (Afreximbank) have jointly signed a commitment letter and term sheet for an emergency $3 billion crude oil repayment loan.

The signing, which took place on Wednesday, August 16, at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Limited to support the federal government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.

The country is about $3 billion deep in debt to trading houses and oil majors for crude oil swap arrangements, through which the country imports petroleum products.

The country is also said to be over six months behind schedule for the repayment in crude.

The direct sale direct purchase (DSDP) initiative is an agreement that allows the sale of crude oil to refiners, who will in turn supply the country with an equivalent worth of petroleum products.

Through the DSDP arrangement, Nigeria exchanges petroleum products for crude cargoes with major trading houses and international oil majors, including BP, TotalEnergies, Vitol, and Mercuria.

The decision to pay cash for petrol imports follows the federal government’s removal of petrol subsidy and the subsequent issuance of petrol importation licences to interested companies — displacing NNPC Limited as the sole importer of petrol.

The country has also faced recent headwinds in the forex market after the Central Bank of Nigeria (CBN) liberalised the local currency that included collapsing all segments of the foreign exchange market into the Investors and Exporters’ (I&E) window and the reintroduction of the “willing buyer, willing seller” model at the window.

However, this didn’t lead to the elimination of the other markets as illiquidity at the official market sent those in need of the FX to other alternative segments like the parallel market and the Peer-2-Peer (P2P) segment.