The Nigerian National Petroleum Company Limited (NNPCL) has announced its plan to deploy the $3.3 billion loan secured from the African Export-Import Bank for various purposes. The funds will meet operational needs, pay upfront tax and royalties owed to Nigeria, and stabilise the foreign exchange market by boosting foreign reserves. The announcement was made in a document titled ‘Frequently Asked Questions – Project Gazelle’ by the Chief Corporate Communications Officer, Olufemi Soneye.
The NNPCL clarified that the loan will provide immediate USD financing for its operational requirements, including the upfront payment of tax and royalty obligations to Nigeria. By using the upfront funding, Nigeria aims to maintain the stability of its currency, the Naira, and increase its foreign exchange reserves.
The oil company stated that it adopted a conservative benchmark oil price of $65 per barrel for repaying the loan, insulating the repayment plan from potential fluctuations in the international oil market. However, it noted that higher oil prices would result in a faster loan repayment and vice versa. The NNPCL earmarked 90,000 barrels of crude oil for the payment process to ensure sufficient cash flow.
The loan arrangement with Afreximbank, initially announced in August, is part of efforts to support the Naira, absorb shocks from economic reforms such as removing fuel subsidies, and unifying the foreign exchange market. The first tranche of the $3 billion loan, amounting to $2.5 billion, was received in December, with UBA serving as the arranger.
This financial initiative seeks to address the immediate liquidity needs of the federal government and contribute to the stability of the Nigerian economy amidst ongoing reforms.
