The Nigerian government is reportedly planning to secure an additional $2 billion in crude oil-backed loans from international creditors, according to sources familiar with the matter.
This move comes as the Nigerian National Petroleum Corporation (NNPC) faces financial challenges, including a $6 billion backlog in payments to international oil traders.
Mele Kyari, Group Chief Executive Officer of NNPC, confirmed to Reuters that the national oil company is in discussions with international creditors to raise an oil-backed credit facility.
Kyari stated that the funds would be used for various business activities, including supporting production growth in the oil and gas sector.
“We have no problem covering our gasoline payments. This is just money for normal business and not a desperate act,” Kyari assured. He added that the loan would be syndicated with regular partners who have been in business with NNPC.
This potential loan follows a $3.3 billion oil-backed loan from Afreximbank secured in August 2023, which was intended to shore up foreign exchange reserves and address the country’s FX challenges. However, sources indicate that this amount has proven insufficient due to increasing fuel subsidy costs.
The NNPC’s financial situation has been further strained by the cap on fuel prices following subsidy removal, despite increases in international crude oil prices and the devaluation of the naira. This has forced NNPC to cover higher landing costs for imported petrol, increasing its financial burden.
Reports suggest that NNPC owes between $4 billion and $5 billion for fuel imports, with some payments dating back to January. This situation has led some international traders to withdraw their refined products from the Nigerian market.
The financial pressures have also impacted Nigeria’s international business relationships. In May, TotalEnergies CEO Patrick Pouyanne revealed that his company had redirected a $6 billion deal to Angola instead of Nigeria due to these issues.
Adding to the challenges, Nigeria’s upstream sector has struggled to increase crude oil production to the targeted 2 million barrels per day, limiting the country’s ability to capitalize on international oil prices and secure sufficient foreign exchange earnings.
As discussions for the new loan continue, the outcome will be closely watched by both domestic and international observers, given its potential impact on Nigeria’s oil sector and broader economy. The NNPC has not disclosed the specific international financial body it is in talks with, nor the exact amount it plans to raise from the transaction.
