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HomeTop NewsNigeria's NNPC seeks $2 bln oil-backed loan to improve finance

Nigeria’s NNPC seeks $2 bln oil-backed loan to improve finance

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The Nigerian National Petroleum Corporation (NNPC) is in negotiations to secure a new oil-backed loan to bolster its finances and invest in its operations, according to its chief executive.

The state-backed oil company, crucial to Nigeria’s economy, aims to raise at least $2 billion, sources familiar with the situation revealed.

Over the past four months, NNPC’s debts to gasoline suppliers have surged to $6 billion. The company’s financial health is critical as Nigeria relies heavily on oil exports for government revenue and foreign exchange reserves.

However, pipeline theft, underinvestment, and costly gasoline subsidies have significantly drained these reserves.

NNPC Chief Executive Mele Kyari confirmed the company’s intention to secure a loan against 30,000-35,000 barrels per day of crude production but did not specify the amount sought. Kyari emphasized that the funds would support all of NNPC’s business activities, including production growth.

“We have no problem covering our gasoline payments. This is just money for normal business and not a desperate act,” Kyari told Reuters.

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NNPC already holds a $3.3 billion oil-backed loan through Afreximbank, but five sources indicated that rising fuel subsidy costs have exacerbated the company’s cash shortage. The new loan would help alleviate this financial strain.

It remains unclear which lender will arrange the loan, as sources suggested Afreximbank might not extend further exposure to Nigeria.

President Bola Tinubu has been attempting to implement reforms in Africa’s largest oil exporter, such as eliminating fuel subsidies and allowing the naira to trade closer to market levels. However, these reforms have put significant pressure on the population, already facing a cost-of-living crisis.

Despite the removal of fuel subsidies, which tripled pump prices, NNPC capped average fuel prices at just above 600 naira per liter a year ago. With the naira’s depreciation and rising global oil prices, the capped prices are now far from market levels.

Last week, fuel queues formed in Lagos as petrol marketers ceased sales, with the ex-depot price in Lagos surpassing 700 naira per liter.

The Dangote refinery, expected to begin gasoline production soon, also faces financial challenges. It has loans and crude oil feedstock costs in U.S. dollars and is unlikely to sell at a loss or wait months for NNPC payments.

Sources indicated that pressure is mounting on the government to increase pump prices, but leaders are cautious. They are mindful of the deadly riots in Kenya, which forced the government to retract plans for tax increases.

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