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African Export-Import Bank (Afreximbank) has announced the successful disbursement of the initial tranche of the syndicated $3.3 billion crude oil prepayment loan to the Nigerian National Petroleum Company Limited (NNPC).
The bank said the initial disbursement was about $2.25 billion, the second and final tranche of $1.05 billion expected to be disbursed later. The bank described the facility as a “landmark financing and Nigeria’s largest crude oil prepayment facility as well as one of the largest syndicated loans raised in Africa in 2023.
“Investors were keen to consider ticket sizes of $250 million and $500 million amidst current headwinds and year-end pressures in the loan markets,” the bank said on Saturday. The terms for the 5-year facility, which have attracted critical reviews in Nigeria in recent times because of impact on the country’s rising debt profile, carries a margin of 6.0 per cent per annum above the 3-month secured overnight financing rate (SOFR).
Also, the transaction structure has an embedded price balance mechanism where 90 per cent of all excess cash from the sale of the committed barrels of the crude oil (after debt service) would be released, while the balance of 10 per cent would be used to prepay the facility. The Bank clarified that this arrangement would effectively shorten the final maturity of the loan and free cash flow from future pledged crude oil cargoes for use by Nigeria.
The initial participating lenders included Afreximbank, Africa’s multilateral trade finance institution; Gunvor International BV, a Geneva-based multinational energy and commodities trading company, and Sahara Energy Resources Limited, an African-owned, leading international energy and infrastructure conglomerate.
Afreximbank said its extensive structuring and technical experience in arranging similar complex oil & gas financing facilities in Angola, Republic of Congo, South Sudan, Chad Egypt, Cote d’Ivoire and Ghana played a huge role in sealing the deal, despite a very challenging period in the global l financial market.
Afreximbank acted as Sole Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent and Collateral Agent, while United Bank for Africa Plc (UBA) acted as the Local and Onshore Account Bank for the transaction.
While applauding the successful financial closure of the transaction, amid criticisms by concerned Nigerians, Afreximbank) President and Chairman of the Board of Directors, Benedict Oramah, explained that “this facility further demonstrates the Bank’s commitment to supporting African economies when such assistance is most needed.
“Afreximbank stands by its member countries in good and in difficult times. The disbursement of the initial $2.25 billion under the facility will support Nigeria’s long-term economic stability, ease access to import financing for raw materials and essential goods, support Industrialisation and trade development efforts. We are pleased that despite the typical year-end encumbrances, our partners and investors rallied and raised the funds required in record time. We thank them for their support,” Oramah said.
The NNPC group chief executive officer, Mele Kyari, said “the proceeds of the facility have been made available to the Federal Republic of Nigeria as one of several efforts towards improving macro-economic stability. The participation of global, international and regional syndication firms is a further testament to the lending market’s appetite for financing sponsored by NNPC and signifies solid market confidence in Nigeria.”
The group managing director/CEO, United Bank for Africa (UBA), Oliver Alawuba said that “UBA is delighted to participate in this transaction which accentuates its commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria”.
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