The Nigerian National Petroleum Company Limited, on Wednesday, announced that it had secured a $3bn emergency crude oil repayment loan from the African Export-Import Bank.
It said the loan would be used by the oil company to support the Federal Government in stabilising Nigeria’s exchange rate.
It was also gathered that the facility would also help in reducing the pump price of Premium Motor Spirit, popularly called petrol.
Nigeria’s exchange rate has been an issue of concern lately, with the dollar rising to over N910 at the parallel market, while oil dealers have been complaining of non-liquid nature of the Importers’ and Exporters official window of the Central Bank of Nigeria.
The NNPCL announced the acquisition of the $3bn loan in a brief statement issued by the company in Abuja, which was titled, ‘Relief for the naira: NNPC Ltd secures $3bn emergency crude repayment loan from AFREXIM Bank.’
The statement read, “The NNPC Ltd and @afreximbank have jointly signed a commitment letter and term-sheet for an emergency $3bn crude oil repayment loan.
“The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.”
Providing further explanation about the loan, the Senior Special Assistant to President on Digital/New Media, O’tega Ogra, in several posts on X (formerly Twitter), explained that the $3bn was not a crude-for-refined products swap loan, but an upfront cash loan against proceeds from a limited amount of future crude oil production.
He said, “Is this loan risky for NNPCL or the Nigerian Treasury? No. The exposure for NNPCL is very limited, covering just a fraction of their entitlements. Additionally, there are no sovereign guarantees tied to this loan.
“What’s the benefit of this loan to Nigeria? The loan will assist NNPCL in settling taxes and royalties in advance. It will also equip the Federal Government with the necessary dollar liquidity to stabilise the naira, with limited risk.
“How will the loan be disbursed? The funds will be released in stages or tranches based on the specific needs and requirements of the Federal Government.”
On whether the initiative would affect fuel prices, Ogra said, “A strengthened naira as a result of this initiative will lead to a reduction in fuel costs. This means that if the naira appreciates in value, the cost of fuel will drop and further increases will be halted.”
He continued, “What about subsidies? Are they coming back? No. A stronger naira will result in lower prices from the current level, making subsidies unnecessary. The deregulation policy remains unchanged.
“How will the loan be repaid? The loan will be repaid against a fraction of proceeds from future crude oil production. It’s a strategic move that ensures a balance between our current economic needs and future production capabilities.
“What is the difference between this and previous swap deals? This is not a crude for refined products agreement where the government does not earn any proceeds from the swap.”
Marketers react Commenting on the development, the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Chinedu Ukadike, explained that the move would infuse dollar into the economy.
He, however, stated that the loan would not address the concerns around foreign exchange in the long run, stressing that as far as Nigeria continues to import petrol, the pressure on the United States dollar would persist. “It is to infuse dollar into the country. But you know the implications of loan in the long run, because it has to be paid back. However, this is not the best approach to the issues that are before us.
“Securing the loan is basically to be able to cushion the effect of dollar scarcity, but our problem remains our problem, which is our inability to refine crude domestically.
“So anytime this loan is being repaid, you will see that the exchange rate will skyrocket. The loan, however, does not sort out the issue of inflation. What we want is a permanent solution to our problem, not a temporal solution,” Ukadike stated.
He argued that “if we can secure $3bn loan to cushion the effect of subsidy removal, then what is the essence of removing the subsidy? Why not use the money to fix the refineries, rather than using it to cushion the effect of subsidy?”
Asked whether some of the dollars would be made available to marketers for petrol imports, he replied, “The NNPC is almost trying to monopolise the market, being the sole importer of PMS into the country.
“If Mr President would say that they are not going to increase the price of fuel in the country, but are going to stabilise it, then it means that fuel subsidy is back. So they are looking for money to pay the differences in cost due to the return of subsidy. (PUNCH)
