Fuel crisis persists as NNPC seeks a second $2 billion crude-backed loan.

By: Adisa Deborah

The Nigerian National Petroleum Company Limited (NNPC), led by Mele Kyari, is negotiating an oil-backed loan to strengthen its finances and allow investment in its operations. The corporation intends to raise at least $2 billion with the proposed new loan, which follows a $3.3 billion emergency crude oil repayment loan from the African Export-Import Bank in August 2023. This comes as Premium Motor Spirit lineups remain in Abuja and Lagos due to NNPC’s supply shortfall.

 

Nigeria’s oil exporter, NNPC, has struggled financially due to pipeline theft, underinvestment, and increased gasoline subsidy costs. Olufemi Soneye, the NNPC spokesperson, has refuted these allegations, claiming that the company’s debts to petrol suppliers had risen to $6 billion. President Bola Tinubu is attempting to implement economic reforms in Nigeria. NNPC is seeking a loan against crude production that will be utilized for all business purposes, including production expansion. The corporation already has a $3.3 billion oil-backed credit from Afreximbank, but the additional loan will help cover these expenditures.

 

Nigeria’s government is considering raising pump prices to tackle double-digit inflation, as the Dangote refinery prepares to start manufacturing gasoline in the coming weeks. However, the refinery’s financing and crude oil feedstock expenses are in US dollars, making it reluctant to sell at a loss within Nigeria or wait months for reimbursements from the NNPC. The government is expected to be careful about raising pump prices, as the Dangote refinery is under government pressure to raise pump prices, and the government is aware of violent protests in Kenya, which led them to backtrack on tax increases.

 

Nigeria’s Petroleum Products Retail Outlets Owners Association of Nigeria, led by Billy Gillis-Harry, has indicated interest in products from NNPC, the country’s sole importer of PMS. Despite the company’s efforts to address fuel supply difficulties, merchants still rely on NNPC products. The PETROAN president encouraged the oil business to ensure long-term benefits for the oil industry. In June 2023, the Federal Government obtained a $925 million lifeline from Afrieximbank to bolster the FX market and satisfy dollar obligations. The NNPC loan is likely to boost the oil industry.

 

Afreximbank has provided NNPC Limited with a $3.3 billion loan, known as Project Gazelle. At the same time, a consortium of crude oil off-taker lenders, including the Oando Group and Sahara Energy Resource Limited, has contributed $925 million. The loan is a financial agreement that allows you to prepay future royalties and taxes to the federal government.

 

The NNPC has allocated up to 90,000 barrels of petroleum for Project Gazelle, providing adequate cash flow for repayment and other financial obligations. The plant is strategically planned and linked to future oil sales, which reduces the risks associated with oil price volatility.