Former vice president of Nigeria and 2023 flag bearer of the Peoples Democratic Party, PDP, Alhaji Atiku Abubakar, on Thursday, urged the Bola Ahmed Tinubu’s administration to explain in detail the $3.3 billion emergency crude repayment loan it secured last year from AFRIEXIM Bank to support the naira and stabilise the foreign exchange market.
Atiku in his reaction in a post on X platform, formerly known as Twitter, said that “In what appears to be a landmark economic decision of the Bola Tinubu-led administration, the Federal Government last year, precisely on August 16, 2023 through the Nigeria National Petroleum Company (NNPC) secured a $3.3 billion emergency crude repayment loan, which according to the NNPC, was to help give support to the Naira and stabilize the Foreign Exchange market.
“The curious thing about this transaction is that up till now, the Federal Government continues to keep mum about it, and the only information available to the public on the mega deal is coming only through unofficial sources from the NNPC.
“The deal is supposed to be a crude-for-cash loan arranged by the African Export-Import Bank.
“According to information available, a Special Purpose Vehicle called Project Gazelle Funding Limited is driving the deal, and it was incorporated in the Bahamas.
“The SPV is the borrower while the NNPC is the sponsor, with an agreement to pay with crude oil to the SPV in order to liquidate the loan at an interest rate that is a little over 12 per cent.
“What is even more confounding about this deal is why the Federal Government would register a company in the Bahamas, knowing full well the recent scandal of the Paradise Papers that involved that country.
“Curiously also, Nigeria’s current Barrels Produced Daily (BPD) is 1.38 million, and according to the Project Gazelle deal, Nigeria is to supply 90,000 Barrels of its daily production, starting from 2024 till it is up to 164.25 million barrels for the repayment of the loan.
“Now, this is where the details get disturbing because Nigeria’s benchmark for the sale of crude per barrel in 2024 is $77.96. A simple multiplication of that figure by 164.25 will give us a whooping $12bn.
“It is on this note that we are calling on the Federal Government to speak up on this shady deal.
“It is inconceivable that the Federal Government will lead the country to take a loan of $3.3b with an interest rate that is not more than 12 per cent, but with estimated repayment amounting to $12bn.
“That is a humongous differential of about $7b between what is in the details of the deal on paper and what indeed is the reality.
“There are questions to be answered on the integrity of this deal, and we earnestly request the Federal Government to talk directly on these cloudy details behind the deal.
“We therefore demand, on behalf of the ordinary people of Nigeria, that the Federal Government provides answers to the following questions.”
1. Has the Federal Government accessed the loan?
2. Is the loan in the government’s borrowing plan as approved by the National Assembly?
3. Who are the parties to the loan, and what specific roles are they expected to play?
4. What are the conditions to the loan, including tenor, repayment terms, the collateral, and the interest rate?
5. And, lastly, why register an SPV in the Bahamas knowing the recent scandal of the country’s notoriety for warehousing unclean assets?
It would be recalled that on August 16, 2023, the Nigerian National Petroleum Corporation (NNPC) Limited accessed a $3 billion crude repayment loan from AFRIEXIM Bank.
While explaining, NNPC listed details of the loan
Below are details:
1. What is the $3 billion loan about?
The NNPC Ltd. secured an emergency $3 billion crude oil repayment loan from AFREXIM Bank. This is not a crude-for-refined products swap but an upfront cash loan against proceeds from a limited amount of future crude oil production.
2. Is this loan risky for NNPC Ltd. or the Nigerian Treasury?
No. The exposure for NNPC Ltd. is very limited, covering just a fraction of their entitlements. Additionally, there are no sovereign guarantees tied to this loan.
3. What’s the benefit of this loan to Nigeria?
The loan will assist NNPC Ltd. in settling taxes and royalties in advance. It will also equip the Federal Government with the necessary dollar liquidity to stabilize the Naira, with limited risk.
4. How will the loan be disbursed?
The funds will be released in stages or tranches based on the specific needs and requirements of the Federal Government.
5. Will this affect fuel prices?
A strengthened Naira as a result of this initiative 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.
6. What about subsidies? Are they coming back?
No. A stronger Naira will result in lower prices from the current level, making subsidies unnecessary. The deregulation policy remains unchanged.
7. How will the loan be repaid?
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.
8. What is the difference between this and previous swap deals?
This is not a crude for refined products agreement where the government does not earn any proceeds from the swap.
