Afreximbank’s $3.3bn Loan to NNPCL Best Priced at 6%, 7-year Tenor, Says Oramah

● Says lower global inflation could reduce interest payment on facility

The President/Chairman, African Export-Import Bank (Afreximbank), Dr. Benedict Oramah, yesterday said the bank’s $3.3 billion loan support to the Nigerian National Petroleum Corporation Limited (NNPCL) remained one of the bestpriced funding interventions with six per cent margin amid a high inflation and interest environment.

He also dispelled as ridiculous, claims that the NNPCL would repay the loan at 12 per cent or $12 billion.

Speaking in an exclusive interview with Arise News, the broadcast arm of THISDAY Newspapers, Oramah said the credit facility would also be repaid within seven years.

According to him, the facility had been helpful in addressing current FX shortage as well as stabilising the financial system.

He also hinted that the loan repayment could be impacted by the inflation trajectory, stating that if lower global inflation could reduce lending rates, this would also reflect in lower interest payments on its current exposure to the NNPCL.

He said, “We are just hoping that inflation would go down globally so that rates can start going down, and, if those rates start going down, the interest rate on this loan would also start going down.”

Commenting on the nature of the loan of which the NNPCL had received $2.25 billion of the total amount, the Afreximbank boss said, “Well, the interest rate on the loan carries a margin of 6.0 per cent per annum above the three-month Secured Overnight Financing Rate (SOFR) that is the base rate which governs the cost of funds, so to say.

“So, if Afreximbank wants to lend money, any other person wants to lend some money – dollars - you start from there and it stays, then you add your margin. And the margin we have I think is six per cent, and this loan is a seven-year loan.”

He said, “Actually, it is one of the best-priced loans in the market today. We’re not talking about three years ago, four years ago. We’re talking of today where interest rates have gone up, and we’re just hoping that inflation will go down globally so that rates can start going down.

“And, if those rates start going down, the interest rate of this loan will start also going down. So, that’s what I thought about it, about the pricing of the loan.

“And it’s transparent, there’s nothing to hide about it, and anybody who wants to compare it can compare it against the yields on the Nigerian bonds trading today.”

Continuing, Oramah said, “It helps acute FX shortage. And you know there are things people do not know, maybe the government will not be saying it, but I’m at liberty because we have a justification for doing what we did. It helps us stabilize the financial system.

“It’s the job of government to do what they know is right actually. Of course, it’s good for people to criticise, ask questions, and all that. But I just think that sometimes, people who are criticizing also have to be reasonable. You don’t have to go to the municipal and start telling stories because if you genuinely want an explanation and you asked, for example, for us, we never got anybody to write to us saying explain this to us.

“We’re not hiding anything. If anybody came and we thought we should, it’s not a confidential matter because everything we do is confidential. And by the way, we are not the only lender, there are other lenders. So, if it’s something that we believe we should explain, we explain.”