Estimated reading time: 3 minutes
The African Export-Import Bank (Afreximbank) has effectively organised a syndicated $3.3 billion crude oil prepayment facility, under the sponsorship of the Nigerian National Petroleum Company Limited (NNPCL). An initial amount of $2.25 billion has already been distributed, with a further $1.05 billion anticipated in a subsequent tranche.
This finance arrangement is notable for being Nigeria’s most substantial crude oil prepayment facility and represents one of the biggest syndicated loans in Africa for the year 2023.
Amidst challenging conditions and year-end demands in the loan markets, investors showed interest in ticket sizes ranging between $250 million and $500 million.
The 5-year facility is subject to a 6.0% per annum margin over the 3-month secured overnight financing rate (SOFR). Its structure includes a price balance mechanism, where 90% of surplus cash from the sale of the committed barrels (post-debt service) will be released.
The remaining 10% will be utilised to prepay the facility, effectively reducing the final maturity period and liberating cash flow from future pledged cargoes for Nigeria’s use.
The initial lenders participating in this facility include Afreximbank, Africa’s multilateral trade finance institution, Gunvor International BV, a Geneva-based energy and commodities trading firm, and Sahara Energy Resources Limited, an African-owned international energy and infrastructure conglomerate.
Afreximbank has leveraged its vast experience in structuring and technical know-how for complex oil & gas financing facilities across various African countries, including Nigeria, Angola, Republic of Congo, South Sudan, Chad, Egypt, Cote d’Ivoire, Ghana, and others.
This expertise was crucial in successfully concluding the facility amidst a challenging market environment. The Bank played multiple roles, including Sole Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent, and Collateral Agent. United Bank for Africa Plc (“UBA”) served as the Local Arranger and Onshore Account Bank.
Prof. Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, said, “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 $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 encumbrances, our partners and investors rallied and raised the funds required in record time. We thank them for their support”.
The NNPCL Group Chief Executive Officer, Mr. Mele Kolo Kyari said, “The proceeds of the facility have been made available to the Federal Republic of Nigeria as one of several efforts towards 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, Group Managing Director/CEO of United Bank for Africa (UBA), expressed his institution’s enthusiasm in being part of the transaction, stating, “UBA is delighted to participate in this transaction which accentuates its commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria”.
