Nigeria gets oil-backed $1bn Afreximbank loan in May

Nigeria is set to receive $1.05 billion from a syndicated loan backed by oil by the end of May.

The loan is expected to revive the economy and boost the supply of hard currency on the local foreign exchange market.

The African Export-Import Bank arranged the funds as part of a $3.3 billion prepayment facility, which Nigeria National Petroleum Company Limited (NNPC Ltd) will use to repay.

Two-thirds of the largest syndicated loan raised by Africa’s biggest oil producer was disbursed in January, signalling a strong commitment to Nigeria’s economic stabilization efforts.

Mr. Denys Denya, Afreximbank’s Senior Executive Vice President for Finance, Administration, and Banking, confirmed the crude availability verification, paving the way for the final release of the balance within the next month.

Nigeria’s struggling economy will receive immediate funds from this strategic financial manoeuvre, which is based on future oil production.

It would be recalled that the Nigerian National Petroleum Company Limited (NNPC Ltd) had sponsored a syndicated US$3.3 billion crude oil prepayment facility.

An initial disbursement of US$2.25 billion has been made.

A second tranche of US$1.05 billion is expected to be disbursed subsequently.

This landmark financing is Nigeria’s largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023.

Investors were keen to consider ticket sizes of US$250 million and US$500 million amidst current headwinds and year-end pressures in the loan markets.

The five-year facility carries a margin of 6.0% per annum above the three-month secured overnight financing rate (SOFR).

The transaction structure features an embedded price balance mechanism that releases 90% of all excess cash from the sale of committed barrels (after debt service) and uses the remaining 10% to prepay the facility.

This effectively shortens the facility’s final maturity and frees up cash flow from future pledged cargoes for Nigeria’s use.