NIGERIA – The Nigerian National Petroleum Company Ltd has secured a US$5 billion corporate finance commitment from the African Export Import Bank (Afreximbank) to fund major investments in Nigeria’s Upstream sector.
The move is a major milestone achievement in the quest for the corporation to scale up investments in the oil and gas industry following the commencement of the implementation of the Petroleum Industry Act.
The NNPC’s $5bn corporate finance commitment from Afreximbank is seen by oil industry stakeholders as a dividend of the Petroleum Industry Act and the incorporation of the NNPC as a limited liability company.
Under the NNPC Ltd funding strategy for selected upstream investments, the Company would be raising between $2.5bn and $3bn as corporate finance to fund major upstream investments.
To achieve this objective, the NNPC plans to take over ownership from non-investing partner through acquisition of pre-emption rights in the sample Joint Venture.
The NNPC’s strategy would also see the company investing in assets to address integrity, bottlenecking and growth issues including rig-less activities, and drilling campaigns in the oil industry.
The company’s preference is to source lenders that can provide this funding in a ratio based on the capacity of each of the lenders.
The funding would also be used to finance part of the NNPC’s investment including acquisition of interest in quality upstream oil and gas producing assets.
The acquisition is an integral part of the NNPC’s corporate strategy to rebalance its portfolio by divesting from some toxic assets to acquire choice strategic assets that will help support its long-term strategic objectives.
The repayment of the funding is expected to be done through a Forward Sale Arrangement whereby the funds provided will constitute the payment purchase of 30-60kpd of crude to be delivered to the lender over a period.
The repayment of the fund is being projected to be made within a four-to-eight-year period with an objective to ensure major fiscal obligations and operating expenses are discharged appropriately
The meeting between the NNPC and Afreximbank team agreed to intensify efforts at deepening investment in Nigeria’s oil sector.
Also, the NNPC and the Afreximbank agreed to, among other things, deepen the business collaboration between the two institutions.
The bank agreed to enter into a finance advisory and fundraising role to raise US$5 billion towards the ‘acquire, invest and operate energy producing assets in Nigeria as part of NNPC’s growth strategy following its incorporation as a limited liability company.’
As part of the landmark transaction, Afreximbank will also underwrite $1bn as part of forward sales base trade finance transaction.
The NNPC and Afreximbank also explored the innovative idea of establishing a pan-African Energy Transition Bank and agreed to collaborate towards achieving the objective.
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