The Nigerian National Petroleum Company Limited (NNPCL) has entered into a series of crude-for-loan deals totaling $8.86 billion, thereby pledging 272,500 barrels of crude oil per day.
This translates to approximately 8.17 million barrels of crude oil monthly to service the debt.
Report had it that NNPC has already repaid $2.61 billion, leaving an outstanding balance of $6.25 billion. The company has received around $6.97 billion from seven crude-for-loan deals.
According to an analysis of report by the Nigeria Extractive Industries Transparency Initiative and the NNPC’s financial statements revealed that under these deals, notable projects include Project Panther, Project Bison, Project Eagle Export Funding (Original, Subsequent, and Subsequent 2 Debts), Project Yield, and Project Gazelle.
These crude-for-loan deals come at a time when Nigeria is struggling to boost its oil production.
The NEITI 2022-2023 report revealed a significant decline in crude oil output, reaching the lowest levels in a decade. In 2022, the country produced 490.94 million barrels of crude oil, a steep drop from the peak of 798.54 million barrels in 2014.
Although production slightly improved to 537.57 million barrels in 2023, this still represents only 67.16 per cent of the country’s peak production capacity.
One of the major challenges facing the sector is production deferment. In 2023, Nigeria deferred 110.66 million barrels of crude oil, down from 153.44 million barrels in 2022.
The deferment was primarily due to unscheduled maintenance, repair issues, and oil theft.
Despite government efforts to curb these issues, including initiatives to reduce theft and sabotage, operational inefficiencies persist.
The crude-for-loan arrangements have sparked concerns, with analysts warning that NNPC may face penalties if it fails to deliver on its obligations. Experts also highlight the risks associated with Nigeria’s oil production, which is fraught with uncertainties.
Providing details about the deal in the document titled, “Everything you need to know about the NNPC Limited’s $3.3bn loan, also known as Project Gazelle,” NNPC said, “This is a financing agreement secured by NNPC Limited to prepay future royalties and taxes to the Federal Government.”
The company also stated that it adopted a lower price benchmark for the $3.3bn crude-for-cash loan to reduce the risk of default and ensure financial stability.
NNPC further said repayments were strategically planned and tied to future oil sales, with conservative pricing in oil sales contracts mitigating the risks associated with oil price volatility.