All you Need to know about NNPCL’s $3billion Emergency Crude Repayment Loan from Afrexim Bank

All you Need to know about NNPCL’s $3billion Emergency Crude Repayment Loan from Afrexim Bank

 

The current economic situation of things in the country especially the planned increase of the fuel price was due to the deep in value of the Naira against the dollar, just yesterday a dollar was exchanged for 972 naira at the parallel market, giving serious need for the government to formulate policy that will help the Naira rally against the dollar and it was this that necessitate the NNPCL to approach the Afrexim Bank to obtain the Emergency Crude Repayment loan and the result seems to be coming in as the Naira appreciated strongly against the dollar as at close of work to the naira gained over 200 naira to close at 752 against the 970 of yesterday morning. 

 

This is an attempt by the president’s aide on New Media O’tega Ogra to answer some questions that might be begging for answers from the public 

 

What is the $3 billion loan about?

The NNPC Ltd. secured an emergency $3 billion crude oil repayment loan from AFREXIM Bank. This is not a crude-for-refined products swap but an upfront cash loan against proceeds from a limited amount of future crude oil production.

 

Is this loan risky for NNPC Ltd. or the Nigerian Treasury?

No. The exposure for NNPC Ltd. is very limited, covering just a fraction of their entitlements. Additionally, there are no sovereign guarantees tied to this loan.

 

What’s the benefit of this loan to Nigeria?

The loan will assist NNPC Ltd. in settling taxes and royalties in advance. It will also equip the Federal Government with the necessary dollar liquidity to stabilize the Naira, with limited risk.

 

How will the loan be disbursed?

The funds will be released in stages or tranches based on the specific needs and requirements of the Federal Government.

 

Will this affect fuel prices?

A strengthened Naira as a result of this initiative will lead to a reduction in fuel costs. This means that if the Naira appreciates in value, the cost of fuel will drop and further increases will be halted.

 

What about subsidies? Are they coming back?

No. A stronger Naira will result in lower prices from the current level, making subsidies unnecessary. The deregulation policy remains unchanged. 

 

How will the loan be repaid?

The loan will be repaid against a fraction of proceeds from future crude oil production. It’s a strategic move that ensures a balance between our current economic needs and future production capabilities.

 

What is the difference between this and previous swap deals?

This is not a crude for refined products agreement where the government does not earn any proceeds from the swap.