The NNPC Ltd. And Afrexim Bank have recently signed a commitment letter and Termsheet for an emergency $3billion crude oil repayment loan. The signing, which took place at the bank’s headquarters in Cairo, Egypt has generated major media divergent views as regards to the purpose and motive behind securing such huge load amid prevalent economic realities surrounding the government of the day.

There has being different discordant tunes from stakeholders on the need and mode of repayment of the loan laying emphasis on the country’s present debt profile which currently stood at  an astronomical level and exacerbated by yet to be resolved fuel subsidy fiscal remediation plan. 

But according to NNPCL the utmost reason in securing such loan is to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market. The corporation had went further in recent press release on its social media platform to divulge pertinent mind boggling questions that might be source of worries to the some concerns Nigerians and systematically answered such questions to precisions as stated below:

What is the $3 Billion Loan About?

The NNPC Ltd. Secured an emergency 43 billion crude oil repayment loan from Afreximbank. This is not a crude-for-refined product swap but an upfront cash loan against proceeds from a limited amount of future crude oil production.

Is this loan risky for NNPC Ltd. or the Nigerian Treasury? 

No. The exposure for NNPC Ltd. is very limited, covering just a fraction of their entitlements. Additionally, there are no sovereign guarantees tied to this loan.

What’s the benefit of this loan to Nigerian? 

The loan will assist NNPC Ltd. in settling taxes and royalties in advance. It will also equip the Federal Government with the necessary dollar liquidity to stabilize the Naira, with limited risk.

How will the loan be disbursed?

The funds will be released in stages or tranches based on the specific needs and requirements of the Federal Government.

Will this loan affect fuel prices?

A strengthened Naira as a result of this initiative will lead to a reduction in fuel costs. This means that if the Naira appreciates in value, the cost of fuel will drop and further increase will be halted.

What about subsidies? Are they coming back?

No. a stronger Naira will result in lower prices from the current level, making subsidies unnecessary. The deregulation policy remains unchanged.

How will the loan be repaid?

The loan will be repaid against a fraction of proceeds from future crude oil production. It’s a strategic move that ensures a balance between our current economic needs and future production capabilities.

What is the difference between this and previous swap deals?

This is not crude for refined products agreement where the government does not earn any proceeds from the swap.

Is this“Ways and Means 2.0”?

Absolutely not. NNPC Ltd. is not in the business of printing money and is not a Central Bank. NNPC Ltd. is borrowing from third party institutions to prepay its taxes and royalties to the treasury (which is would have normally paid) in advance.

For more updates, on the NNPC Ltd’s $3billion Emergency Crude Repayment Loan from Afreximbank, stay tuned to the official social media channels of NNPC Ltd. and the Government of Nigeria. Let’s work together for a prosperous Nigeria!