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Afreximbank Disburses US$925 Million To FG To Improve Naira Value Against U.S. $

 Olushola Bello

…This announcement follows the success of the first accordion tranche of the US$3.3 billion facility

…Oando group, Sahara Energy Resources make significant contribution

Efforts to salvage the value of the Naira against the United States dollar received a boost on Thursday, as Afrieximbank disbursed   US$925 million to the Federal Government.

African Export-Import Bank had on Wednesday announced an additional disbursement of US$925 million under the syndicated US$3.3 billion crude oil-backed prepayment facility sponsored by the Nigerian National Petroleum Company (NNPC) Limited. This brings the total current funded facility size to US$ 3.175 billion.

Arranged and coordinated by Afreximbank, the accordion arrangement saw the raising of a combined total of US$925 million from a consortium of crude oil off-taker lenders including but not limited to the Oando Group and Sahara Energy Resource Limited.

Afreximbank acted as Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent and Collateral Agent for the transaction which is expected to provide further support for Nigeria’s macroeconomic stability and long-term economic growth while enhancing the country’s industrialisation and trade development efforts.

This announcement follows the success of the first accordion tranche of the US$3.3 billion facility. In December 2023, the project received funded commitments totaling US$2.25 million. The US$925 million accordion arrangement raises the total amount disbursed to US$3.175 billion.

Commenting on the disbursement, Prof. Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, said: “The milestone achieved thus far, on this facility, demonstrates the Bank’s capabilities in performing its role as a crucial development partner for Africa. It reaffirms our commitment to assisting our member states in their efforts to achieve economic growth and stability. This funding will greatly support the attainment of Nigeria’s short and long-term economic development priorities.”

Prof. Oramah described the original facility as ‘a landmark’ for being the largest crude oil-backed facility in Nigeria and one of the largest syndicated debts raised in Africa, adding that the closure of the first accordion demonstrated the existence of positive market appetite for well structured commodities-backed instruments.

Mele Kyari, Group CEO, NNPC Limited commended Afreximbank Management and team for their investment philosophy and active interest in co-creation of prosperity. “The successful disbursement of the first accordion under project Gazelle and its interest in funding viable and strategic projects is a clear indication of investors’ confidence in NNPCL and Nigeria’s growth aspirations.” Said Mr. Kyari.

He further assured Afreximbank and all investing communities of NNPCL’s resolve to continue to grow the nation’s hydrocarbon resources and strengthen its partnerships across the oil and gas value chain locally, and globally.

Meanwhile, the naira appreciated to N1,481 on Thursday from its lowest level of N1,488.60/$ recorded in three weeks on the official market on Wednesday.

The figure represents an increase in value of 0.87 percent.

During trading hours, the exchange rate recorded a high of N1,505 and a low of N1,401, according to market data from FMDQ Exchange, a platform that oversees the official FX trading in Nigeria.

The NNPCL had on August 17, 2023, announced that it had secured a $3.3bn emergency crude oil repayment loan from the African Export-Import Bank.

According to NNPCL, the loan would be used by the oil company to support the Federal Government in stabilising Nigeria’s exchange rate.

About five months later NNPC also announced it would prepay future royalties and taxes to the Federal Government from the $3.3bn financing deal it got from the African Export-Import Bank.

The  NNPCL disclosed this in a document titled, ‘Frequently Asked Questions – Project Gazelle’, released by its Chief Corporate Communications Officer, Olufemi Soneye.

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,” the company 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.

Giving details on the benchmark oil price, the company said the facility was using a conservative crude price of $65/barrel to calculate the allocated crude to be produced and sold in the future.

“This provides a safety margin for price fluctuations in the future.NNPC Limited has reserved up to 90,000 barrels of crude for Project Gazelle, ensuring sufficient cash flow for repayment and other financial obligations.

“The quantity of crude earmarked (90,000 barrels) is sized to ensure enough cash is available for the repayment of the facility when it is due. This also ensures that NNPC Limited can meet other cash flow obligations, considering the expected future price of crude oil globally,” it stated

NNPC also 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.

Source: APO Group

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