The Nigerian National Petroleum Corporation (NNPC) and the African Export-Import Bank (Afreximbank) have signed a five-year, $1.04 billion oil trade financing deal for the exploration and export of crude oil.
Underpinned by a Forward Sale Agreement (FSA) and Offtake Contracts with the NNPC serving as borrower and seller, the transaction comprises a Pre-Export/Shipment Finance Facility with proceeds expected to boost tax revenues as well as foreign currency receipts worth approximately $2.4 billion.
According to a statement by Afreximbank the facility will, “create thousands of jobs in the oil and gas refining value chain, all by more than $2.4 billion to the immediate benefit of the government, thereby improving the balance of trade and Gross Domestic Product in Nigeria – Africa’s largest economy.”
The NNPC is expected to enter an FSA through which it will deliver 35,000 barrels of crude oil per day, which will permit the corporation to conduct its repayment process to the bank, similar to previous arrangements with some of its other joint venture companies, wherein the NNPC uses crude oil to net its cash call debt obligations.
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The financing deal complies with Afreximbank’s commitment to promoting local content within Africa’s oil and gas industries to generate foreign receivables into the continent, with the agreement being lauded by the bank’s President and Chairman of the Board of Directors, Prof. Benedict Oramah, who emphasized that the deal takes a balanced approach with regards to global climate change goals.
“Stopping development for parts of Africa today to achieve a clean environment for the whole world tomorrow is utterly foolhardy,” Oramah stated, concluding, “They [Africans] should thus not bear the brunt of the punishment for the mistakes of others.”
The deal is expected to boost the NNPC’s goal of becoming a globally recognized commercial entity and thus attracting foreign investment and financing into the sector.
