The Nigerian National Petroleum Company Limited has committed to delivering 272,500 barrels of crude oil per day as part of various crude-for-loan agreements worth a total of $8.86 billion.
This daily pledge translates to approximately 8.17 million barrels of crude oil being utilized each month for these loan arrangements by the national oil company.
This information is derived from an analysis of a report by the Nigeria Extractive Industries Transparency Initiative, along with the financial statements of the NNPC.
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Among the agreements, key initiatives include Project Panther, Project Bison, Project Eagle Export Funding (including Original, Subsequent, and Subsequent 2 Debts), Project Yield, and Project Gazelle.
According to findings from The PUNCH, the NNPC has successfully repaid $2.61 billion in loans, which accounts for 29.4 percent of the total credit facility. This leaves $6.25 billion, or 70.6 percent, still outstanding.
Furthermore, of the total $8.86 billion credit facility, approximately $6.97 billion has been received from seven crude-for-loan transactions.
One of the prominent initiatives, Project Panther, is a joint venture between NNPC and Chevron Nigeria Limited, supported by both international and local financial institutions.
This project has obtained a loan facility of $1.4 billion, with a commitment of 23,500 barrels per day allocated to service the debt. Repayment is expected to begin after a grace period, with financing terms that include a margin of 5.5 percent over the Secured Overnight Financing Rate (SOFR) and a liquidity premium.
Another important venture is Project Bison, which is associated with NNPC’s goal to secure a 20 percent equity stake in the Dangote refinery. Ultimately, the national oil company acquired only a 7.25 percent stake in the refinery.
For this project, NNPC secured a $1.04 billion loan from Afrexim Bank, with 35,000 barrels per day pledged as collateral. This loan was fully repaid in June 2024.
Project Eagle Export Funding consists of three distinct loans designed to meet various financial needs. The original loan, taken in 2020 for $935 million, was serviced with 30,000 barrels per day and was fully repaid by September 2023.
A subsequent loan of $635 million was also fully repaid by the same timeframe. The third tranche, referred to as Project Eagle Export Funding Subsequent 2 Debt, was secured in 2023 for $900 million, with a pledge of 21,000 barrels per day. Repayment for this loan is set to commence in June 2024, with a maturity date in 2028.
Project Yield, aimed at supporting the Port Harcourt Refining Company, involves a loan of $950 million, with 67,000 barrels per day pledged for its repayment.
The loan, which was secured in 2022, is set to begin repayment in December. This seven-year financing is vital for refurbishing the refinery and improving domestic refining capacity.
Despite this crude-for-loan arrangement, reports indicate that fuel production at the Port Harcourt refinery has not yet started, with multiple delays reported as of August. Commitments from the Federal Ministry of Petroleum Resources and the NNPC have repeatedly fallen short.
More recently, Project Gazelle was initiated to stabilize Nigeria’s foreign exchange market. In December 2023, NNPC entered into a $3 billion forward sale agreement, pledging 90,000 barrels per day from Production Sharing Contract assets to meet future tax and royalty obligations.
By the end of 2023, $2.25 billion had been drawn from this facility, with repayments expected to commence by mid-2024.
These crude-for-loan agreements come at a challenging time for Nigeria, which is striving to enhance its oil production.
The NEITI 2022-2023 report highlights a notable decline in crude oil production, reaching its lowest levels in a decade. In 2022, Nigeria produced 490.94 million barrels of crude oil, significantly down from a high of 798.54 million barrels in 2014.
While production saw a slight increase to 537.57 million barrels in 2023, this still represents only 67.16 percent of the nation’s peak production capacity.
One of the primary challenges facing the sector is the issue of production deferment. In 2023, Nigeria deferred 110.66 million barrels of crude oil, a decrease from 153.44 million barrels in 2022. The deferments were mainly attributed to unscheduled maintenance, repair problems, and oil theft.
Despite government efforts to address these challenges, including initiatives aimed at reducing theft and sabotage, operational inefficiencies continue to hinder progress.
NEITI reported that oil theft and sabotage led to the loss of 5.25 million barrels in 2023, further complicating production efforts.
Recently, the House of Representatives Special Joint Committee directed the NNPC to cease any further crude-for-loan agreements.
This directive comes in response to reports indicating that the company intends to secure an additional $2 billion in oil-backed loans as part of its efforts to address a $6 billion backlog owed to international oil traders, particularly in light of the recent removal of the fuel subsidy.
