PIA: Nigeria’s Oil Industry Receives $5 Billion In Funding From Afreximbank

PIA: Nigeria’s Oil Industry Receives $5 Billion In Funding From Afreximbank

The African Export Import Bank (Afreximbank) has committed $5 billion in corporate credit to the Nigerian National Petroleum Company (NNPC) to fund large investments in the country’s upstream industry.

The finance pledge 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 Malam Mele Kyari, group managing director/chief executive officer.

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 decision marks a significant step forward in the corporation’s efforts to increase investments in the oil and gas business 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.

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The new legislation has opened up new economic prospects for the NNPC, allowing it to generate more money for the country and attracting foreign direct investment into Nigeria’s energy sector.

The PIA has also elevated stakeholder expectations of the business while also providing it with a lot of leeway to boost oil and gas investment.

Oil sector players perceive the NNPC’s $5 billion corporate finance pledge from Afreximbank as a benefit of the Petroleum Industry Act and the NNPC’s formation as a limited liability company.

The Company would raise between $3.5 billion and $5 billion in corporate finance to fund key 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 example 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 challenges in the oil industry, such as rig-less activities and drilling campaigns.

The organization prefers to find lenders who can supply this cash in a ratio that is based on each lender’s capabilities.

The funds will also be utilized to fund a portion of the NNPC’s investment, which will include the purchase of a stake in high-quality upstream oil and gas producing properties.

The purchase is part of the NNPC’s corporate plan to rebalance its portfolio by divesting from some hazardous assets in order to acquire high-quality strategic assets that would support the company’s long-term strategic goals.

The funding will be repaid through a Forward Sale Arrangement, in which the funds supplied will be used to purchase 90-120kpd of oil to be delivered to the lender over a period of time.

The repayment of the money is expected to take four to eight years, with the goal of ensuring that key fiscal obligations and operations expenses are met in a timely manner.

The NNPC and Afreximbank teams agreed to further up their efforts to deepen investment in Nigeria’s oil sector.

In addition, the NNPC and the Afreximbank agreed to strengthen their business relationship, among other things.

The bank promised to provide financial advice and raise $5 billion to “acquire, invest, and operate energy producing assets in Nigeria as part of NNPC’s expansion strategy following its formation as a limited liability company.”

Afreximbank will also underwrite $1 billion in forward sales-based trade credit as part of the historic transaction.

The NNPC and Afreximbank also discussed the novel idea of forming a pan-African Energy Transition Bank and agreed to work together to achieve the goal.