Oil-for-cash loan: Afreximbank confirms disbursement of $2.25bn to Nigeria, to release $1.05bn next

The African Export-Import Bank (Afreximbank) says it has successfully arranged a syndicated $3.3 billion crude oil prepayment facility sponsored by the Nigerian National Petroleum Company (NNPC) Limited.

The bank confirmed an initial disbursement of $2.25 billion under the crude oil prepayment facility.

In August 2023, NNPC said it secured a $3 billion emergency crude repayment loan from Afreximbank to support the naira and stabilise the foreign exchange market.

Nigeria will pay an interest of 11.85 percent per annum on the $3.3 billion “pre-export finance facility” (PxF) arranged by Afreximbank. 

According to a statement on Saturday by the bank, a second tranche of $1.05 billion is expected to be disbursed subsequently.

United Bank for Africa (UBA) acted as the local arranger and onshore account bank for the transaction, which Afreximbank said is expected to “ease the foreign exchange illiquidity and stabilise the Nigerian currency market”. 

“This landmark financing is Nigeria’s largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023.  The 5-year facility carries a margin of 6.0% per annum above the 3-month secured overnight financing rate (SOFR),” Afreximbank said.

The financial institution said the transaction structure has an embedded price balance mechanism where 90 percent of all excess cash from the sale of the committed barrels (after debt service) will be released to the borrower.

On the other hand, the balance of 10 percent will be used to prepay the facility, which the bank said will effectively shorten the “final maturity of the facility and freeing cashflow from future pledged cargoes for use by Nigeria”. 

“The initial participating lenders are Afreximbank, Africa’s multilateral trade finance institution, Gunvor International BV, a Geneva-based multinational energy and commodities trading company and Sahara Energy Resources Limited, an African-owned, leading international energy and infrastructure conglomerate,” the bank said.

“Afreximbank’s extensive structuring and technical experience in arranging similar complex oil & gas financing facilities in Angola, Republic of Congo, South Sudan, Chad Egypt, Cote d’Ivoire. Ghana, etc. was brought to bear in the successful closure of the facility, notwithstanding a very challenging market environment. 

“The Bank acted as Sole Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent and Collateral Agent.”

ORAMAH: $2.25Bn WILL SUPPORT NIGERIA’S LONG-TERM ECONOMIC STABILITY 

Benedict Oramah, Afreximbank president, said the facility is another example of the bank’s dedication to helping African economies when they most need it.

Oramah said the $2.25 billion facility will support Nigeria’s long-term economic stability and ease access to import financing for raw materials and essential goods.

“Afreximbank stands by its member countries in good and in difficult times. The disbursement of the initial US$2.25 billion under the facility will support Nigeria’s long-term economic stability, ease access to import financing for raw materials and essential goods, support industrialization and trade development efforts,” he said.

Speaking on the transaction, Mele Kyari, group chief executive officer (GCEO), NNPC, said the proceeds of the facility have been made available to Nigeria as a strategy to improving macroeconomic stability. 

“The participation of global, international and regional syndication firms is a further testament to the lending market’s appetite for financing sponsored by NNPCL and signifies solid market confidence in Nigeria,” Kyari said. 

On his part, Oliver Alawuba, group managing director and CEO, UBA, expressed the bank’s delight to participate in the transaction “which demonstrates once again UBA’s commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria and across Africa”.  

“UBA has a track record of structuring and participating in significant resource-based transactions, leveraging its global network and dollar balance sheet,” Alawuba said. 

Similar transactions, Alawuba said, include a DRC deal, a Kenyan deal, and a Senegal SAR Orion deal with Afreximbank.