Afreximbank Confirms Release of $2.25bn of Crude Oil Prepayment Loan to Nigeria
Says $1.05bn balance to be ready soon
The African Export-Import Bank (Afreximbank) has confirmed an initial disbursement of $2.25 billion out of the $3.3 billion crude oil prepayment facility recently approved for Nigeria.
Though the federal government received the $2.25 billion foreign exchange (FX) facility since last December, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, had while speaking on ARISE News Channel, stated that it was in the position of Afreximbank to announce the disbursement at the appropriate time.
The long-awaited credit support seeks to ameliorate the acute FX shortage in the country which has constrained economic activities and doused investors’ confidence.
Also earlier in December, President Bola Tinubu had assured Nigerians of the commitment of his administration to resolve the FX backlogs through the injection of funds into the market
United Bank for Africa Plc (UBA) acted as the Local Arranger and Onshore Account Bank for the transaction, which is being sponsored by the Nigerian National Petroleum Company Limited (NNPCL).
It is expected to ease the foreign exchange illiquidity and stabilise the Nigerian currency market.
A statement by Afreximbank posted on its website yesterday announced that an initial disbursement of $2.25 million has been made. A second tranche of $1.05 billion is expected to be disbursed subsequently.
The statement explained that the five-year facility carries a margin of six per cent per annum above the three-month secured overnight financing rate (SOFR).
“The transaction structure has an embedded price balance mechanism where 90 per cent of all excess cash from the sale of the committed barrels (after debt service) will be released to the borrower, while the balance of 10 per cent will be used to repay the facility, effectively shortening the final maturity of the facility and freeing cash flow from future pledged cargoes for use by Nigeria,” the statement explained.
The initial participating lenders are Afreximbank; Gunvor
International BV, a Genevabased multinational energy and commodities trading company, and Sahara Energy Resources Limited, an African-owned, leading international energy and infrastructure conglomerate.
Afreximbank said in the statement that its extensive structuring and technical experience in arranging similar complex oil and gas financing facilities in Angola, the Republic of Congo, South Sudan, Chad Egypt, and Cote d’Ivoire. Ghana and others were brought to bear in the successful closure of the facility, despite a very challenging environment.
“The Bank acted as Sole Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent and Collateral Agent,” the statement added.
The landmark financing is described as the largest syndicated loan ever raised by Nigeria in the international market and one of the largest syndicated transactions in Africa in recent years.
The groundbreaking transaction is said to represent a significant vote of confidence in Nigeria and Africa.
The transaction is seen as a significant further step in unleashing Nigeria’s economic potential.
This landmark financing is said to be Nigeria's largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023.
Speaking on the deal, Afreximbank’s President and Chairman of the Board of Directors, Prof. 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 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, and support industrialisation and trade development efforts. We are pleased that despite the typical year-end pressures, our partners and investors committed the funds required in record time. We thank them for their support”.
On his part, the Group Chief Executive Officer of NNPCL, Mr. Mele Kolo Kyari, noted that “the proceeds of the facility have been made available to the Federal Republic of Nigeria as one of the strategies to improve 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 NNPCL and signifies solid market confidence in Nigeria.”
Also speaking on the landmark deal, the Group Managing Director/CEO of United Bank for Africa (UBA), Oliver Alawuba said “UBA is delighted to participate in this transaction, which demonstrates once again UBA’s commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria and across Africa. UBA has a track record of structuring and participating in significant resource-based transactions, leveraging its global network and dollar balance sheet. Similar transactions include the DRC deal, Kenyan deal, Senegal SAR Orion deal with Afreximbank.”