Afreximbank, a pan-African multilateral financial institution, has confirmed the initial disbursement of $2.25 billion under a syndicated $3.3 billion crude oil prepayment loan facility arranged for the Nigerian National Petroleum Company Limited (NNPCL). This loan aims to bolster Nigeria’s economy, particularly by stabilizing the exchange rate market amidst ongoing fiscal and monetary reforms. A second tranche of $1.05 billion is expected to be disbursed in the near future, as part of the broader financial arrangement.
The Nigerian oil giant, NNPC, had announced in August of the previous year that it had secured this substantial loan, which it described as crucial for supporting ongoing governmental economic reforms. The loan is viewed as a “relief for the naira,” helping to address the country’s exchange rate volatility.
Afreximbank, led by President Benedict Oramah, hailed the disbursement as a landmark achievement, noting that this syndicated loan is the largest of its kind ever raised by Nigeria and one of the largest in Africa in recent years. The bank emphasized the strategic importance of the loan in ensuring Nigeria’s macroeconomic stability, contributing to its long-term growth while enabling smoother access to raw materials and supporting trade development initiatives.
A Historic and Strategic Financial Deal
The deal also marks a significant moment for the African financial community. Afreximbank, which orchestrated the loan syndication, raised such a substantial amount during a challenging market environment, further bolstering investor confidence in Nigeria and Africa as a whole. The deal was successfully arranged at a time when many financiers were concluding their year-end transactions, which Afreximbank believes is a clear vote of confidence in the country’s economic potential.
The syndicated loan has a five-year duration, with a 6.0% annual margin above the three-month Secured Overnight Financing Rate (SOFR). The loan’s structure includes a price balance mechanism, where 90% of excess revenue from the sale of committed crude oil barrels (after debt service) will be released to Nigeria, while the remaining 10% will be used to repay the facility more quickly, reducing its final maturity and freeing up future cash flow for the country.
The first disbursement of $2.25 billion has already been made, with the second tranche of $1.05 billion to follow. This financial deal is particularly notable for its scale and the wide array of participating financial institutions involved.
Strengthening Nigeria’s Economic Foundations
According to Afreximbank, the deal is not only beneficial for Nigeria’s fiscal stability but also serves to encourage industrialization, improve access to critical imports, and promote broader economic growth. Investors involved in the loan included the bank itself, Gunvor International BV, a global energy and commodities trader based in Geneva, and Sahara Energy Resources Limited, an African-owned energy conglomerate. Afreximbank’s experience in structuring similar complex financing facilities in countries such as Angola, Egypt, and Ghana was crucial in navigating the intricacies of the deal.
The bank’s role as the Sole Mandated Lead Arranger, Technical and Modelling Bank, and Book-runner in the facility was pivotal to its successful closure. United Bank for Africa (UBA) participated as a Local Arranger and Onshore Account Bank, reinforcing the involvement of prominent African financial institutions in the deal.
Institutional Confidence and Future Prospects
Afreximbank’s President, Benedict Oramah, emphasized that this financing arrangement underscores the bank’s unwavering commitment to supporting African economies, especially in times of difficulty. He expressed gratitude for the timely support from investors and partners who helped secure the necessary funds amidst end-of-year market pressures.
Mele Kyari, the Group Chief Executive Officer of NNPC, also praised the deal, noting that the funds from the facility would be immediately available to the federal government, contributing to Nigeria’s economic stabilization efforts. Kyari highlighted the importance of this transaction, signaling strong market confidence in both NNPC and the broader Nigerian economy.
Finally, Oliver Alawuba, the Group Managing Director and CEO of UBA, reiterated the bank’s commitment to supporting initiatives aimed at addressing Nigeria’s economic challenges, further enhancing the role of financial institutions in stabilizing the country’s economy.
