A $3 billion oil-backed loan to the Nigerian National Petroleum Company (NNPC) Limited is being arranged by the African Export-Import Bank (Afreximbank), according to Reuters. The loan is intended to help stabilise the Naira, which has been weakening against the Dollar due to a huge foreign exchange backlog.
Reuters reported that the Cairo-based bank has reached out to oil traders to assess their willingness to participate in the loan to Nigeria’s state-owned oil company. The bank is also working on the terms that it will offer to the trading houses, the report said.
A senior oil executive who spoke to Reuters on condition of anonymity said that there was a lot of interest from the traders, but they needed to see the conditions. He also said that rising oil prices above $90 a barrel would boost the interest.
The Naira has been under pressure as demand for Dollars exceeds supply on the official market, forcing many businesses and individuals to resort to the black market. The Naira appreciated to N755 per Dollar on the official market, while it sold for N1,020/$1 on the unregulated Peer-2-Peer market, according to a previous report.
In August, NNPC announced that it had secured an emergency $3 billion crude oil repayment loan from Afreximbank, which is aimed at stabilising the Naira and the foreign exchange market. The loan is the fourth transaction between NNPC and Afreximbank in the last three years, as both entities are shareholders in the bank, which focuses on enhancing investments and prosperity in Africa.
Recall that the Federal Government, early last month, reported a 13.6 percent drop in daily crude oil production in the month of July, leaving the country seriously short of US dollar revenues from crude oil export.
The Nigerian Upstream Petroleum Regulatory Commission, NUPRC, disclosed that production averaged 1.08 million barrels per day compared to 1.25mbpd recorded in June, 2023.
The July production figure was a major setback for government which has a production target of 1.69 million barrels per day in the 2023 budget. The volume of production was also significantly lower than the 1.7 million barrels per day production quota allocated to the country by the Organisation of Petroleum Exporting Countries, OPEC.