African Export-Import Bank (Afreximbank) has successfully arranged a syndicated US$3.3 billion crude oil prepayment facility sponsored by the Nigerian National Petroleum Company Limited (NNPCL). An initial disbursement of US$2.25 million has been made. A second tranche of US$1.05 million is expected to be disbursed subsequently.
The United Bank for Africa Plc (UBA) acted as the Local Arranger and Onshore Account Bank for the transaction, which is expected to ease the foreign exchange illiquidity and stabilise the Nigerian currency market. The transaction is seen as a significant further step in unleashing Nigeria’s economic potential.
This landmark financing is Nigeria’s largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023. The five-year facility carries a margin of six percent per annum above the three-month secured overnight financing rate (SOFR).
The transaction structure has an embedded price balance mechanism where 90 percent of all excess cash from the sale of the committed barrels (after debt service) will be released to the borrower, while the balance of 10% will be used to prepay the facility, effectively shortening the final maturity of the facility and freeing cashflow from future pledged cargoes for use by Nigeria.
The initial participating lenders are Afreximbank, Africa’s multilateral trade finance institution, Gunvor International BV, a Geneva-based multinational energy and commodities trading company and Sahara Energy Resources Limited, an African-owned, leading international energy and infrastructure conglomerate.
Afreximbank’s extensive structuring and technical experience in arranging similar complex oil & gas financing facilities in Angola, Republic of Congo, South Sudan, Chad Egypt, Cote d’Ivoire, and Ghana was brought to bear in the successful closure of the facility, notwithstanding a very challenging market environment.
The bank reportedly acted as Sole Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent and Collateral Agent.
Lauding the successful financial close, Afreximbank President and Chairman of the Board of Directors, Professor Benedict Oramah, explained that “this facility further demonstrates the bank’s commitment to supporting African economies, when such assistance is most needed. “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, 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”.
The NNPCL Group Chief Executive Officer, Mr Mele Kolo Kyari, while commenting on the transaction, noted 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.”
The Group Managing Director/CEO, United Bank for Africa (UBA), Oliver Alawuba, also said that “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. 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 DRC deal, Kenyan deal, Senegal SAR Orion deal with Afreximbank.”
