Stories by Godfrey AKON
The Nigerian National Petroleum Company Limited, NNPCL says the $3 billion emergency crude repayment loan it recently secured from the African Export Import Bank – Afreximbank, will be released in tranches based on the specific needs and requirements of the Federal Government.
NNPCL, in a statement, said the loan will assist the company in settling taxes and royalties in advance, adding that it will also equip the Federal Government with the necessary dollar liquidity to stabilize the Naira, with limited risk.
Recall that the NNPC Limited announced on Thursday that it signed a commitment letter and Term Sheet with Afreximbank for an emergency $3 billion crude oil repayment loan.
The company said the signing, which took place 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 stabilizing the exchange rate market.
It noted that the emergency $3 billion crude oil repayment loan from Afreximbank “is not a crude-for-refined product swap but an upfront cash loan against proceeds from a limited amount of future crude oil production.
On whether the loan is risky for NNPC Ltd. or the Nigerian Treasury, the company said “the exposure for NNPC Ltd. is very limited, covering just a fraction of their entitlements. Additionally, there are no sovereign guarantees tied to this loan.”
It noted that the loan will assist NNPC Ltd. in settling taxes and royalties in advance, adding that it will also equip the Federal Government with the necessary dollar liquidity to stabilize the Naira, with limited risk.
“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.
The NNPCL dismissed any return to subsidies, stating that 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.
“Is this “Ways and Means 2.0″ Absolutely not. NNPC Ltd. is not in the business of printing money and is not a Central Bank. NNPC Ltd. is borrowing from third party institutions to prepay its taxes and royalties to the treasury (which it would have normally paid) in advance,” it said.
