Pan-African multilateral financial institution, the African Export-Import Bank, has confirmed the disbursement of an initial $2.25 billion under a syndicated $3.3 billion crude oil prepayment facility sponsored by the Nigerian National Petroleum Company Limited.
In August last year, the NNPC said it had secured the crude oil repayment loan from the Cairo-based bank that will support the government’s reforms to stabilise the exchange rate market.
Describing it as “relief for the naira”, the NNPC had announced that the loan will “immediately” see the disbursement of funds to support the government in its ongoing fiscal and monetary policy reforms.
Afreximbank described it as a landmark financing agreement, stressing that it is the largest syndicated loan ever raised by Nigeria in the international market and one of the largest syndicated debts raised in Africa in recent years.
The facility, the Prof Benedict Oramah-led bank said, will enhance Nigeria’s macroeconomic stability and long-term economic growth, while enabling access to raw materials and trade development efforts.
According to Afreximbank, raising such a significant amount at year end when many financiers were closing their books represented a vote of confidence on Nigeria and Africa.
“African Export-Import Bank has successfully arranged a syndicated $3.3 billion crude oil prepayment facility sponsored by the NNPC. An initial disbursement of $2.25 billion has been made. A second tranche of $1.05 billion is expected to be disbursed subsequently.
“This landmark financing is Nigeria’s largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023,” it added.
Afreximbank stated that investors were keen to consider ticket sizes of $250 million and $500 million amid current headwinds and year-end pressures in the loan markets.
“This landmark financing is Nigeria’s largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023.”
The five-year facility, it said, carries a margin of 6.0 per cent per annum above the three-month Secured Overnight Financing Rate (SOFR).
“The transaction structure has an embedded price balance mechanism where 90 per cent of all excess cash from the sale of the committed barrels (after debt service) will be released.
“The balance of 10 per cent will be used to prepay the facility, effectively shortening the final maturity of the facility and freeing cash flow from future pledged cargoes for use by Nigeria,” it stated.
It listed the initial participating lenders as 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.
Afreximbank said its extensive structuring and technical experience in arranging similar complex oil and gas financing facilities in Angola, Republic of Congo, South Sudan, Chad Egypt, Cote d’Ivoire, Ghana, among others, 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, Book-runner, Facility Agent, Offshore Account Bank, Intercreditor Agent and Collateral Agent, while United Bank for Africa Plc (UBA) acted as the Local Arranger and Onshore Account Bank,” it added.
While lauding the successful financial close, Afreximbank President and Chairman of the Board of Directors, Oramah, explained that the facility further demonstrates the bank’s commitment to supporting African economies when such assistance is most needed.
“Afreximbank stands by its member countries in good and in difficult times. The disbursement of the initial $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 industrialisation and trade development efforts.
“We are pleased that despite the typical year-end encumbrances, our partners and investors rallied and raised the funds required in record time. We thank them for their support,” Oramah said.
The NNPC’s Group Chief Executive Officer, Mele Kyari, who also commented on the “landmark transaction”, noted that the proceeds of the facility have been made available to the Federal Government as one of several efforts towards improving macro-economic stability.
“The participation of global, international and regional syndication firms is a further testament to the lending market’s appetite for financing sponsored by NNPC and signifies solid market confidence in Nigeria,” he said.
In his remarks in the deal, the Group Managing Director and Chief Executive Officer, UBA, Oliver Alawuba reaffirmed the commitment of the bank to such interventions when necessary.
“UBA is delighted to participate in this transaction which accentuates its commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria,” he stated.
