NNPCL, Afreximbank seal $3bn crude repayment deal to redeem Naira

•Loan another dubious attempt to stabilise currency –Atiku

From Uche Usim and Ndubuisi Orji, Abuja

The Federal Government secured a reprieve for the tumbling Naira on Wednesday, with the Nigerian National Petroleum Company Limited (NNPCL) and Afreximbank jointly signing a commitment letter and term sheet for an emergency $3 billion crude oil repayment loan.

The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPCL to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.

The Naira in recent times crashed to an all-time low last week, hitting N950 on the parallel market, a development experts described as a death knell on the economy.

President Bola Ahmed Tinubu, since his inauguration on May 29, has taken a cocktail of measures that have upset the economy in what analysts described as too many iron bars in the fire at the same time.

The NNPCL explained that the deal is not a crude-for-refined products swap but an upfront cash loan against proceeds from a limited amount of future crude oil production.

On if the loan is a risky package, the national oil company said its exposure level was very limited, covering just a fraction of its entitlements. Additionally, there are no sovereign guarantees tied to this loan.

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

“The funds will be released in stages or tranches based on the specific needs and requirements of government”, it explained.

On its effect on fuel prices, NNPC said a  strong currency 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.

“A stronger Naira will result in lower prices from the current level, making subsidies unnecessary. The deregulation policy remains unchanged.

“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”, it further explained.

Nonetheless, economic and finance experts have described the loan as worrisome.

Reacting to news of government’s intervention, former Commissioner of Finance in Imo State, Prof Uche Uwaleke, said that much as intervention in the Forex market by the CBN was desirable, a more cost effective option would have been to use what is left of Nigeria’s external reserves as opposed to taking a loan from Afreximbank or the International Monetary Fund (IMF).

“The fact that the $3 billion loan was taken by NNPCL, a company still owned 100 per cent by the Federal Government with the Ministries of Finance and Petroleum Resources holding 50 per cent share each, makes it more worrisome.

“By implication, the Federal Government that is already saddled with huge debt is borrowing to lend to the CBN, when it should have been the other way round. Ultimately, this new loan contracted by the NNPCL adds to the growing public debt and may have been contracted at non concessionary terms being an emergency loan.

“It’s important that Nigerians, especially the National Assembly, are informed about the terms of the loan and the collateral security involved.

“Without doubt, this $3 billion loan on the balance sheet of NNPCL will make the company less attractive and possibly jeopardize the ongoing plan to private the company by listing it on the Nigerian Exchange”, he said.

Meanwhile former Vice President,  Atiku Abubakar, has said announcement by the Nigerian National Petroleum Company Limited (NNPCL) that it had taken a loan to primarily  support the naira as “patently fraudulent”.

Atiku, in a statement by his  Special Assistant on Public Communication, Phrank Shaibu, yesterday, said the announcement was allegedly a ruse to make the naira appreciate on the parallel market.

The former vice president, while describing the statement by NNPCL as “cosmetic and unimaginative”, said it has “exposed President Bola Tinubu, as a lilliputian economist that lacked ideas on how to rescue the economy he had pushed to the edge with unviable policies.”

He stated that monetary policy was not the job of the NNPCL but the Central Bank of Nigeria (CBN) and wondered why the NNPCL, which is expectedly  a profit-making organisation would go ahead to take a loan for the sole  purpose of stabilising the naira.  “For many years, Tinubu claimed that he built the economy of Lagos from scratch. Now, he has been exposed as a charlatan.

His administration detained Emefiele and vilified him for taking FX loans from JP Morgan and Goldman Sachs running into $7.5billion, which was used in defending the naira.

“Now, Tinubu’s administration claims to have done the same thing by forcing the NNPCL to take a loan of $3billion to defend the naira. We, however, have it on good authority that this is all a ruse to force the naira to appreciate at the parallel market, an action that will further affect the government’s credibility.

“The NNPCL has failed to shed the toga of an ordinary government agency. No wonder it has refused to become a public limited liability company, as stated in the Petroleum Industry Act.  The NNPCL boss, Mele Kyari, who is also desperate to retain his job, has allowed himself to become a willing political tool just like Emefiele. If the NNPCL was a publicly listed oil firm like Aramco and Mobil, would it obtain a loan in order to ‘defend the naira’?”

“He forced the CBN to float the naira even though the country had liquidity problems. Now, he is on the verge of taking the West African region to war without Senate approval. Tinubu is nothing but a myth that will continue to unravel.

“He claims to have deregulated the petroleum sector and yet NNPC is still the one determining the price of petrol. He has pegged the price of petrol and yet claims that there is no subsidy. Nigerians must not allow themselves to be deceived by this man, “ Atiku stated.