Nigeria to get $1.05bn Afreximbank crude oil-related loan May

Nigeria is expected to receive $1.05 billion from a syndicated loan backed by oil by the end of May to help revive its economy and boost the supply of hard currency on the local foreign-exchange market.

The amount forms part of a $3.3 billion pre-payment facility arranged by African Export-Import Bank (Afreximbank) that will be repaid using crude cargoes from the Nigerian National Petroleum Company Limited, NNPCL.

Two-thirds of the largest syndicated loan raised by Nigeria was disbursed in January.

“The verification of the crude availability has happened so we expect in the next month to finalize the release of the balance. Based on future production, you get the money now.” said Denys Denya, senior executive vice president for finance, administration and banking at Afreximbank.

The facility has participation from commercial banks and oil traders, most of which have already secured internal approvals, he said, without giving further details.

In January, Afreximbank said, “This landmark financing 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.”

Nigeria missed out on the oil price boom in 2022 as it was struggling to boost its production while oil prices were above $100 per barrel. The country has been grappling for years with a shortage of foreign currency and a lack of economic diversification away from crude oil exports.

At the time of the first batch of loan disbursement, NNPCL Group Chief Executive Officer, Mele Kolo Kyari, said that “the proceeds of the facility have been made available to the Federal Republic of Nigeria 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 NNPCL and signifies solid market confidence in Nigeria,” Kyari added.

Nigeria has battled years of acute foreign-exchange scarcity arising from low crude production and a lack of economic diversification. Since coming to office in May, President Bola Tinubu has worked to address the shortages with a series of reforms aimed at attracting foreign investors and boosting economic growth.

They include the Central Bank of Nigeria, CBN, clearing a $7 billion backlog of unmet foreign-exchange obligations to industries and foreigners, allowing the naira to trade more freely and increasing interest rates steeply.

The Cairo-based lender specializing in financing trade across Africa is also finalizing a $200 million funding plan that includes guarantees, and letters of credit to support the East African Crude Oil Pipeline linking Uganda’s oil fields to Tanzania’s Port of Tanga, Denya said.

The funds will be a boost for the project estimated to cost $5 billion that has received backlash from climate activists who have successfully persuaded lenders and insurers to steer clear of the pipeline.

The construction of the 1,443-kilometer (897-mile) pipeline “will improve intra-regional trade which is part of our mandate, so it ticks all the boxes for us — there’s really no reason for us not to be supporting this.” Denya said.

The investments will add to plans by Afreximbank to increase loans and advances by 53 per cent to as much as $40 billion by year-end, he said.