Nigeria State Oil Company to Receive $3BN loan from Afreximbank

In a historic milestone for Nigeria and Africa, the African Export-Import Bank (Afreximbank) has successfully orchestrated a syndicated crude oil prepayment facility worth an astounding US$3.3 billion. Sponsored by the Nigerian National Petroleum Company Limited (NNPCL), this financial arrangement represents not only the largest syndicated loan ever raised by Nigeria in the international market but also one of the most substantial syndicated debts raised on the African continent in recent years.

The facility holds immense promise for Nigeria, as it is expected to significantly bolster the country’s macroeconomic stability and foster long-term economic growth. This achievement is particularly noteworthy as it was secured towards the year-end when many financiers traditionally close their books, underscoring a resounding vote of confidence in Nigeria and Africa as a whole.

A sum of US$2.25 billion has already been disbursed as an initial tranche, with an additional US$1.05 billion set to follow in the second tranche. This marks Nigeria’s largest-ever crude oil prepayment facility and stands as one of Africa’s most substantial syndicated loans for the year 2023. Investors displayed eagerness to participate in ticket sizes ranging from US$250 million to US$500 million, despite prevailing headwinds and year-end market pressures.

The financing package spans a duration of five years and carries a margin of 6.0% per annum above the 3-month secured overnight financing rate (SOFR). Notably, the transaction structure includes a unique price balance mechanism, wherein 90% of all excess cash generated from the sale of the committed barrels (after servicing the debt) will be released. This will effectively shorten the final maturity of the facility and liberate cash flow from future pledged cargoes for utilisation within Nigeria.

The initial group of participating lenders comprises Afreximbank, Africa’s foremost multilateral trade finance institution, Gunvor International BV, a Geneva-based multinational energy and commodities trading company, and Sahara Energy Resources Limited, a prominent African-owned international energy and infrastructure conglomerate.

Afreximbank, drawing on its extensive experience in structuring and facilitating complex oil & gas financing facilities across Africa, played a pivotal role in orchestrating this landmark deal. The bank assumed multiple critical roles, acting 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 contributed as the Local Arranger and Onshore Account Bank.

Prof. Benedict Oramah, President and Chairman of the Board of Directors at Afreximbank, lauded the successful financial close. He emphasised the bank’s unwavering commitment to supporting African economies in both favourable and challenging times. The initial disbursement of US$2.25 billion is poised to bolster Nigeria’s long-term economic stability, facilitate access to import financing for essential goods and raw materials, and lend support to industrialization and trade development initiatives. Prof. Oramah expressed gratitude to the bank’s partners and investors for their swift response and support in raising the required funds.

Mr. Mele Kolo Kyari, Group Chief Executive Officer of NNPCL, commented on the significance of this transaction, highlighting its contribution to enhancing macroeconomic stability in Nigeria. He also noted the global, international, and regional syndication firms’ participation, which underscores the lending market’s strong confidence in Nigeria.

Oliver Alawuba, Group Managing Director/CEO of United Bank for Africa (UBA), expressed the bank’s delight in participating in this transaction, affirming its commitment to providing vital interventions and solutions to address economic challenges in Nigeria.

This landmark financing stands as a testament to Nigeria’s economic potential and the enduring commitment of financial institutions to support the nation’s growth and stability. It represents a resounding vote of confidence in the country’s prospects and the wider African continent.