Major Setback for Dangote Deal as NNPC Seeks $2 Billion Crude-Backed Loan

The Nigerian National Petroleum Company (NNPC) Ltd is actively seeking a $2 billion loan in Europe, with plans to repay it using 35,000 barrels of crude oil per day, according to insider sources. The move comes as NNPC’s group chief executive officer, Mele Kyari, engages in discussions to secure the oil-backed loan aimed at financing the company’s operations.

NNPC’s share of Nigeria’s oil production is relatively low due to the nature of production sharing contracts (PSCs) governing offshore drilling. The new loan could further strain the company’s resources, which are already committed to various existing loans and crude swap agreements to import petrol, sold at approximately N700 per liter despite a landing cost exceeding N1,000 per liter. Despite these financial maneuvers, NNPC continues to deny ongoing petrol subsidies.

Seeking Financial Lifelines

Top NNPC officials are currently in Europe, targeting Standard Chartered Bank in the UK for the loan. Progress on this front remains limited, insiders report.

This is not the first instance of NNPC leveraging Nigeria’s oil resources for financial support. In August 2023, the company secured a $3 billion crude-backed loan from the African Export-Import Bank (Afreximbank) to stabilize the naira and the foreign exchange market. This arrangement involved pledging 164.25 million barrels of crude oil, equivalent to 90,000 barrels per day, through Project Gazelle Funding Ltd, a special purpose vehicle in the Bahamas. The first disbursement of $2.25 billion was made in January, followed by an additional $925 million in June.

Dangote Refinery Controversies

The recent efforts to secure a new loan occur amid tensions between the Dangote refinery and industry regulators. The refinery, initially struggling to source crude locally, is now set to receive priority crude supplies from NNPC, paid for in naira, potentially saving Nigeria over $610 million monthly on fuel imports.

Aliko Dangote, the refinery’s chairman, recently accused NNPC officials and oil traders of operating a blending plant in Malta, a claim that NNPC’s Mele Kyari has denied. This conflict has drawn significant attention, highlighting issues like the alleged production of substandard petroleum products by local refineries, including Dangote’s.

The House of Representatives’ joint committee on petroleum resources is currently investigating these claims, along with the “indiscriminate” issuance of licenses and the importation of substandard petroleum products into Nigeria.

The ongoing financial and regulatory challenges underscore the complexity and volatility of Nigeria’s oil sector, as NNPC navigates through securing critical funding while managing domestic and international expectations.