The Nigerian National Petroleum Corporation Limited has borrowed USD $1 billion to import petroleum into the country.
According to reports from THEWILL, the money was borrowed for the importation of petroleum products for May and June with the Central Bank of Nigeria (CBN) acting as guarantor of the credit facility which was provided by the African Export-Import Bank (Afreximbank).
The NNPC and its Subsidiary Duke Oil Incorporated are the beneficiaries of this 3-year term loan, which is under Afreximbank’s Ukraine Crisis Adjustment Trade Financing Programme for Africa. (UKAFPA).
NNPC and its Partners have been struggling to meet the country’s OPEC production quota of 1.826 million barrels per day,(BPD), largely due to attacks on pipelines, crude oil theft, and the likes of it. it has struggled to provide crude oil to companies that won crude swap contracts who are supposed to import petrol, jet fuel, and diesel into the country in exchange for crude allocated to them under the Direct Sale, Direct Purchase (DSDP) agreement.
Hence the reason why the NNPC/Duke Oil needs dollars to import refined products into the country under the swap deal from a government-owned company to a commercial limited corporation, since it is technically still the sole importer of the products on behalf of the Nigerian government, which then subsidizes the cost to users.
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The sources added that the NNPC/Duke Oil does not have the dollars to fund the imports because of very low crude production from the country’s oil assets. Nigeria currently manages to produce and export about 1.2 million BPD.
However, before its recent financial troubles, the NNPC usually remitted about $3.6bn monthly into its account with CBN, and about USD$98 billion annually, which it achieved around 2015, according to records published by the CBN.
Documents seen by THEWILL showed that the Central Bank will take the hit for the loan should it go bad or unpaid. The loan was remitted in two tranches of $500m, according to the sources at Afreximbank who did not want to be identified because they are not authorized to speak on the matter.
This deal followed an official plea by the NNPC, with support from the Presidency, urging the CBN to assist in guaranteeing the deal, without which, Afreximbank would not approve the loan.
Nigeria largely relies on proceeds from the sale of crude oil to meet the country’s demand for dollars as well as its budgetary obligations. However, with the very low crude output and exit of foreign investors as oil prices collapsed due to the COVID-19 pandemic, the naira has been on a free fall on the black market recently hitting a record N725 – $1 before pulling back to about N700 -$1. But with the rebound in crude prices, foreign investors have not returned largely because of the uncertainties and risks associated with the general elections due to begin in February 2023.
The Central Bank in a statement said it “remained committed to resolving the foreign exchange issues confronting the nation and as such has been working to manage both the demand and supply side challenges.”
Nigeria depends mainly on imports for all its consumption, which has continued to put pressure on its forex reserves prompting the CBN to introduce multiple forex measures and warn that the country needs to look inward and seek alternatives as one panacea to the problem.
The CBN said demand pressure was huge from manufacturers and persons paying school fees and hospital bills abroad but added that it was seeking means to earn foreign exchange to meet these demands in the wake of poor revenue from crude sales.