Manufacturing and Energy

Afreximbank disburse $2.25b to Nigeria under the Crude Oil Prepayment Facility of the NNPC

Afreximbank has just made an exciting announcement – they have disbursed an initial amount of US$2.25 billion as part of a syndicated Crude Oil Prepayment Facility. This facility, sponsored by the Nigerian National Petroleum Company Limited, has garnered the participation of global, international, and regional syndication firms. This is a clear indication of the lending market’s strong interest in financing supported by NNPCL and reflects the market’s confidence in Nigeria.

This financing is truly groundbreaking, as it 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. The Facility will not only contribute to Nigeria’s macroeconomic stability and long-term economic growth but also facilitate access to raw materials and promote trade development efforts.

It is worth noting that raising such a substantial amount at the end of the year, when many financiers are wrapping up their books, is a remarkable show of confidence in Nigeria and Africa as a whole. This is a testament to the potential and opportunities that lie within the region.

Afreximbank has successfully organized a syndicated crude oil prepayment facility worth US$3.3 billion, sponsored by the Nigerian National Petroleum Company Limited (NNPCL). They have already disbursed an initial amount of US$2.25 billion, with a second tranche of US$1.05 billion expected to follow.

This financing arrangement is a significant milestone for Nigeria, as it is their largest crude oil prepayment facility to date and one of the largest syndicated loans raised in Africa in 2023. Despite the current challenges and pressures in the loan markets, investors were eager to participate with ticket sizes ranging from US$250 million to US$500 million.

The facility has a duration of 5 years and carries a margin of 6.0% per annum above the 3-month secured overnight financing rate (SOFR). What makes this transaction unique is the embedded price balance mechanism. Under this mechanism, 90% of any excess cash generated from the sale of the committed barrels (after debt service) will be released, while the remaining 10% will be used to prepay the facility. This effectively shortens the final maturity of the facility and allows Nigeria to utilize cashflow from future pledged cargoes.

Overall, this financing arrangement not only provides Nigeria with a substantial amount of capital but also offers flexibility and financial freedom for the country’s future endeavors.

The initial lenders involved in this project are Afreximbank, Gunvor International BV, and Sahara Energy Resources Limited. Afreximbank, being Africa’s multilateral trade finance institution, brought their extensive experience in structuring and arranging similar oil & gas financing facilities to the table. They have successfully closed similar deals in countries like Angola, Republic of Congo, South Sudan, Chad, Egypt, Cote d’Ivoire, and Ghana. Despite the challenging market conditions, Afreximbank acted as the Sole Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent, and Collateral Agent. United Bank for Africa Plc (“UBA”) also played a role as the Local Arranger and Onshore Account Bank.

Afreximbank’s President and Chairman of the Board of Directors, Prof. Benedict Oramah, expressed his satisfaction with the successful financial close. He emphasized that this facility showcases the bank’s commitment to supporting African economies, especially during times of need. The initial disbursement of US$ 2.25 billion under this facility will contribute to Nigeria’s long-term economic stability, facilitate access to import financing for essential goods and raw materials, and support industrialization and trade development efforts. Despite the usual challenges faced at the end of the year, the partners and investors came together and raised the required funds in record time. Afreximbank extends its gratitude to them for their unwavering support.

Mr. Mele Kolo Kyari, the NNPCL Group Chief Executive Officer, expressed his thoughts on this significant deal, emphasizing that the funds from this facility will greatly contribute to enhancing the macro-economic stability of the Federal Republic of Nigeria. The involvement of renowned global, international, and regional syndication firms further demonstrates the lending market’s strong interest in financing projects supported by NNPCL, showcasing their unwavering confidence in Nigeria’s market.

Oliver Alawuba, the Group Managing Director/CEO of United Bank for Africa (UBA), enthusiastically shared his excitement about being part of this transaction, highlighting UBA’s dedication to providing essential interventions and solutions to address economic challenges in Nigeria. UBA’s participation in this venture showcases their commitment to supporting the country’s economic growth and development.

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