NNPC has secured $5bn Funding from Afreximbank for Nigeria’s Oil Industry.
The African Export-Import Bank has committed $5 billion in corporate finance to the Nigerian National Petroleum Company Ltd to fund major investments in the country’s upstream sector, according to reports.
The funding commitment stems from a meeting on Wednesday in Cairo, Egypt, between Prof Benedict Oramah, Chairman of the Board of Directors and President of the African Export-Import Bank (Afreximbank), and the NNPC Ltd team, led by Group Managing Director/Chief Executive Officer, Malam Mele Kyari.
Mr. Umar Ajiya, the Chief Financial Officer; Engr. Adokiye Tombomieye, the Group Executive Director, Upstream; Mr. Bala Wunti, the Group General Manager, NAPIMS; Mr. Lawal Sade, the Managing Director, NNPC Trading, and others accompanied Kyari on the trip.
The move marks a significant step forward in the corporation’s efforts to increase investments in the oil and gas industry following the start of the Petroleum Industry Act’s implementation.
President Muhammadu Buhari signed the PIA into law on August 16, 2021.
After receiving an application for registration from the Federal Government, the NNPC LTD was incorporated by the Corporate Affairs Commission on September 22 last year with the President’s approval.
The new legislation has opened up new business opportunities for the NNPC, allowing it to generate more revenue for the country and attracting foreign direct investment into Nigeria’s energy sector.
The PIA has also raised stakeholder expectations of the company while also providing it with a lot of leeway to stimulate oil and gas investment.
Oil industry stakeholders see the NNPC’s $5 billion corporate finance commitment from Afreximbank as a dividend of the Petroleum Industry Act and the NNPC’s incorporation as a limited liability company.
The Company would raise between $3.5 billion and $5 billion in corporate finance to fund major upstream investments under NNPC Ltd’s funding strategy for selected upstream investments.
To achieve this goal, the NNPC intends to purchase pre-emption rights in the sample Joint Venture and take over ownership from the non-investing partner.
The NNPC’s strategy also includes investing in assets to address integrity, bottlenecking, and growth issues in the oil industry, such as rig-less activities and drilling campaigns.
The company prefers to find lenders who can provide this funding in a ratio that is based on each lender’s capacity.
The funding would also be used to finance part of the NNPC’s investment including acquisition of interest in quality upstream oil and gas producing assets.
The acquisition is an integral part of the NNPC’s corporate strategy to rebalance its portfolio by divesting from some toxic assets to acquire choice strategic assets that will help support its long term strategic objectives.
The repayment of the funding is expected to be done through a Forward Sale Arrangement whereby the funds provided will constitute the payment purchase of 90-120kpd of crude to be delivered to the lender over a period.
The repayment of the fund is being projected to be made within a four to eight year period with an objective to ensure major fiscal obligations and operating expenses are discharged appropriately
The meeting between the NNPC and Afreximbank team agreed to intensify efforts at deepening investment in Nigeria’s oil sector.
Also, the NNPC and the Afreximbank agreed to, among other things, deepen the business collaboration between the two institutions.
The bank agreed to enter into a finance advisory and fundraising role to raise $5bn towards the “acquire, invest and operate energy producing assets in Nigeria as part of NNPC’s growth strategy following its incorporation as a limited liability company.”
As part of the landmark transaction, Afreximbank will also underwrite $1bn as part of forward sales base trade finance transaction.
The NNPC and Afreximbank also explored the innovative idea of establishing a pan-African Energy Transition Bank and agreed to collaborate towards achieving the objective.