August 02, (THEWILL) – The Nigerian National Petroleum Corporation Limited (NNPC) has borrowed USD$1 billion to import petroleum products into the country for May and July with the Central Bank of Nigeria (CBN) acting as guarantor of the credit facility being provided by the Africa Export-Import Bank (Afreximbank), THEWILL can report.
The 3-year term loan, which the NNPC and its subsidiary, Duke Oil Incorporated are the beneficiaries, is under the Afreximbank’s Ukraine Crisis Adjustment Trade Financing Programme for Africa (UKAFPA).
As the NNPC Limited and its JV partners struggle to meet the country’s OPEC production quota of 1.826 million barrels per day, bpd, largely due to crude oil theft, attacks on pipelines and maintenance at major fields, THEWILL gathered 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.
According to sources at the Afreximbank, the NNPC/Duke Oil need dollars to import refined products into the country under the swap deal since the corporation is technically the sole importer of the products on behalf of the Nigerian government, which then subsidises the cost to users under a widely fraudulent and discredited fuel subsidy programme. Duke Oil is one of the beneficiaries of the DSDP deal.
The sources added that the NNPC/Duke Oil do 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.
According to multiple sources at the Federal Ministry of Finance and several State Governments, the NNPC has contributed nothing at all into Federal coffers for revenue allocation by the Federation Account Allocation Committee (FAAC). The corporation said it has been deducting from the monies that should be going into that account to cover the cost of petroleum products it imports.
Before its recent financial troubles, the NNPC usually remitted about $3.6bn monthly into its accounts with the CBN, and about USD$98 billion per annum which it achieved around 2015, according to records published by the CBN. But low crude production, large scale theft and significant opacity of NNPC operations has crippled its earnings over time.
According to media reports, an NNPC document on Sunday showed that the corporation remitted $2.7 billion between January and June into its accounts in the Central Bank, but checks by this newspaper revealed the deposits were to their current account to fund their operations and not for use by the federation.
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 the Afreximbank who did not want to be identified because they are not authorised 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 at 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 consumptions, 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.
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