By Adedapo Adesanya
The Nigerian National Petroleum Corporation (NNPC) has signed a $1.5 billion prepayment deal led by Standard Chartered with oil traders Vitol Group and Matrix Energy.
This will be the first of such deal since the coronavirus pandemic struck and it is expected to provide Nigeria with enough fund to help boosts its finances which were affected by the oil price crash in April as COVID-19 lockdowns erased nearly one-third of global oil demand.
Known as Project Eagle, the financing package was also backed by both the African Export-Import Bank (Afreximbank) and United Bank for Africa (UBA).
According to the agreement, Vitol and Matrix will each get 15,000 barrels per day of crude oil as repayment over five years. This will kick off in August and expire by 2025.
Prepayments with traders are widely used in commodity finance as banks consider them to be one of the more secure forms of lending in countries viewed as risky.
According to reports, for trading firms such as Vitol, these loans are ideal for securing long-term supplies and boosting thin margins.
The national oil company has been trying to raise cash through prepayments with traders for years.
However, the firm’s finances and costly gasoline subsidies have made it tough for it to secure private financing on attractive terms but with the announcement of the removal of subsidies some months ago has presented an opportunity.
According to market sources, NNPC will use a large portion of the money to pay taxes owed by its subsidiary Nigerian Petroleum Development Company Limited (NPDC) while the remainder will go towards operational expenses and capital expenditure.
Some also hinted that the money from the pre-payment could fund an upgrade of the Port Harcourt refinery.
The government also opened a licensing round for 57 available marginal oilfields in June, the first time in more than 15 years to help raise funds. It has gotten over 600 applicants and auctioning will be completed before the end of the year.
more recommended stories
Unfavourable IEA Forecast Pulls Down Oil Prices
By Adedapo Adesanya Crude prices fell.
Fire Razes Lagos Warehouse of Guinness Nigeria
By Dipo Olowookere A fire incident.
OPEC Forecasts Steeper Decline in Oil Demand
By Adedapo Adesanya The Organization of.
Nigeria Records First Rise in Business Activities in 4 Months
By Dipo Olowookere For the first.
Airtel, Standard Chartered Bank Partner to Expand Operations
By Dipo Olowookere The duo of.
Naira Depreciates to N386 Per Dollar at Investors Segment
By Adedapo Adesanya After closing flat.
NASD OTC Exchange Sustains Growth by 0.34%
By Adedapo Adesanya Unlisted securities admitted.
Drop in US Inventories, Improved Demand Spur 2% Rise in Brent
By Adedapo Adesanya News that oil.