The Nigerian National Petroleum Company (NNPC) Ltd., has secured a $5billion corporate finance commitment from the African Export Import Bank (Afreximbank), to fund major investments in Nigeria’s Upstream sector.
The funding commitment is the outcome of a meeting yesterday between the NNPC Ltd team led by the Group Managing Director/Chief Executive Officer, Mele Kyari and the President/Chairman, Board of Directors Afreximbank, Prof. Benedict Oramah, in Cairo, Egypt.
Recall that in November 2021, Afreximbank had signed a $1.04 billion deal with the NNPC at the Intra-African Trade Fair (IATF), in Durban, South Africa.
The commitment marks a major achievement in NNPC’s quest to scale up investments in the oil and gas industry following the commencement of the implementation of the Petroleum Industry Act (PIA), which was signed into law in August last year.
Yesterday’s meeting facilitated an agreement between the NNPC and Afreximbank to intensify efforts at deepening investment in Nigeria’s oil sector, according to a statement.
Kyari was accompanied by NNPC’s Chief Financial Officer, Umar Ajiya; Group Executive Director, Upstream, Adokiye Tombomieye; the Group General Manager, NAPIMS, Bala Wunti; and the Managing Director, NNPC Trading, Lawal Sade, and a host of others.
Terms of engagement
Under the terms, the Bank agreed to enter into a financial advisory and fundraising role to raise $5 billion to “acquire, invest and operate energy-producing assets in Nigeria, as part of NNPC’s growth strategy following its incorporation as a limited liability company.”
Afreximbank will also underwrite $1 billion as part of the forward sales base trade finance transaction.
The Bank and NNPC will also explore the innovative idea of establishing a pan-African Energy Transition.
The Bank agreed to enter into a financial advisory and fundraising role to raise $5 billion to acquire, invest and operate energy-producing assets in Nigeria, as part of NNPC’s growth strategy following its incorporation as a limited liability company.
Under its funding strategy, NNPC expects to raise between $3.5 billion and $5 billion as corporate finance to fund major upstream investments.
To this end, NNPC plans to take over ownership from non-investing partners through the acquisition of pre-emption rights in the joint venture (JV) assets to address integrity, bottlenecking and growth issues, including rig-less activities and drilling campaigns in the oil industry.
This strategy would enable the Company to rebalance its portfolio, shed some of its toxic assets to acquire choice strategic assets that will help support its long term strategic objectives.
NNPC will also prioritise sourcing lenders that can provide this funding in a ratio based on each lender’s capacity.
The repayment of the funding would be done through a forward sale arrangement (FSA), whereby the funds provided will constitute the payment purchase of 30,000 to 60,000 barrels daily crude to be delivered to the lender over a period.
The repayment of the fund is projected to be made within a four to eight-year period to ensure fiscal obligations and operating expenses are discharged appropriately.