Afreximbank and UBA Extend $2.25 Billion Crude Oil Prepayment Facility to Nigeria
The African Export-Import Bank (Afreximbank) has facilitated a syndicated crude oil prepayment facility of US$3.3 billion, sponsored by the Nigerian National Petroleum Company Limited (NNPCL). The initial disbursement of US$2.25 million has already been made, with a second tranche of US$1.05 million expected to follow.
United Bank for Africa Plc (UBA) played a key role as the Local Arranger and Onshore Account Bank for the transaction. The arrangement is anticipated to address foreign exchange illiquidity and contribute to stabilizing the Nigerian currency market.
The syndicated crude oil prepayment facility facilitated by Afreximbank for the Nigerian National Petroleum Company Limited (NNPCL) is regarded as a significant step in unlocking Nigeria’s economic potential.
This financing represents Nigeria’s largest crude oil prepayment facility and stands as one of the largest syndicated loans raised in Africa in 2023. The transaction is expected to have substantial implications for Nigeria’s economic development and financial stability.
The 5-year facility arranged by Afreximbank carries a margin of 6.0% per annum above the 3-month secured overnight financing rate (SOFR). The transaction’s structure includes an embedded price balance mechanism: 90% of all excess cash generated from the sale of the committed barrels (after debt service) will be released to the borrower (Nigeria), while the remaining 10% will be utilized to prepay the facility.
This prepayment mechanism effectively shortens the final maturity of the facility, providing flexibility and freeing up cash flow from future pledged cargoes for use by Nigeria.
The initial participating lenders in the syndicated crude oil prepayment facility are:
- Afreximbank: Africa’s multilateral trade finance institution.
- Gunvor International BV: A Geneva-based multinational energy and commodities trading company.
- Sahara Energy Resources Limited: An African-owned, leading international energy and infrastructure conglomerate.
These lenders are integral to the successful implementation of the financing arrangement, contributing their expertise and resources to support Nigeria’s economic objectives.
Afreximbank’s successful closure of the syndicated crude oil prepayment facility for the Nigerian National Petroleum Company Limited (NNPCL) benefited from the institution’s extensive structuring and technical experience.
Afreximbank has previously arranged complex oil and gas financing facilities in various African countries, including Angola, the Republic of Congo, South Sudan, Chad, Egypt, Cote d’Ivoire, and Ghana. Despite facing a challenging market environment, Afreximbank’s expertise played a crucial role in structuring and closing the financing arrangement for Nigeria.
Afreximbank played multiple key roles in the syndicated crude oil prepayment facility for the Nigerian National Petroleum Company Limited (NNPCL). The bank served as the Sole Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent, and Collateral Agent.
Prof. Benedict Oramah, President and Chairman of the Board of Directors at Afreximbank, commended the successful financial close, emphasizing the bank’s commitment to supporting African economies, especially in times of significant need. The facility reflects Afreximbank’s dedication to fostering economic development and stability in the region.
“Afreximbank stands by its member countries in good and in difficult times. The disbursement of the initial US$ 2.25 billion under the facility will support Nigeria’s long-term economic stability, ease access to import financing for raw materials and essential goods, and support industrialization and trade development efforts.
We are pleased that despite the typical year-end pressures, our partners and investors committed the funds required in record time. We thank them for their support”.
Mr. Mele Kolo Kyari, the NNPCL Group Chief Executive Officer, commented on this landmark transaction, noting that “the proceeds of the facility have been made available to the Federal Republic of Nigeria as one of the strategies to improving macro-economic stability.
“The participation of global, international, and regional syndication firms is a further testament to the lending market’s appetite for financing sponsored by NNPCL and signifies solid market confidence in Nigeria.”
Oliver Alawuba, the Group Managing Director/CEO, of United Bank for Africa (UBA), said: “UBA is delighted to participate in this transaction, which demonstrates once again UBA’s commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria and across Africa.
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“UBA has a track record of structuring and participating in significant resource-based transactions, leveraging its global network and dollar balance sheet. Similar transactions include the DRC deal, the Kenyan deal, and Senegal SAR Orion deal with Afreximbank.”
