Abuja, Aug. 17, 2023: The Nigerian National Petroleum Company Limited (NNPC Ltd) and Afreximbank have jointly signed a commitment letter and term sheet for an emergency three billion dollars crude oil repayment loan.
The signing took place on Wednesday in the bank’s headquarters in Cairo, Egypt, according to a statement by the NNPC Ltd.
The deal will cushion the effect of fuel price jump and scarcity of forex, associated with the free float of the naira, in line with President Bola Tinubu’s promise of harmonising various exchange rates.
The naira float had seen the currency plunge from below N500 per dollar on the official exchange windows to a record low of about N900 naira.
Petrol now sells at N617 from the first increment of N540 per litre since May 29, when Tinubu announced that fuel subsidy was gone.
And oil marketers in several reports said there might be another round of pump price increase as crude price further increased in the international market.
On Monday, the National Bureau of Statistics (NBS) reported that Nigeria’s Consumer Price Index (CPI) rose to 24.08 per cent in July from the 22.41 per cent recorded in June 2023.
On this background, the NNPC Ltd in the statement explained that the emergency three billion dollars crude oil repayment loan would provide some immediate disbursement.
It said the disbursement would enable the NNPC Ltd to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.
Tinubu had on Tuesday assured Nigerians that there will be no further increase in the pump price of petrol, in spite of the fuel subsidy removal.
The president’s reaction through his Special Adviser on Media and Publicity, Ajuri Ngelale to journalists in Abuja followed the announcements by NNPC Ltd that there would be no increase in the pump price of petrol anywhere in the country.
Tinubu, who acknowledged that there were inefficiencies within the downstream sector, contributing to the fuel price controversy, however, assured that loopholes associated with smooth delivery of petroleum products would be addressed without delay.
Labour unions’ had also threatened to embark on strike any moment.
Meanwhile, Mr O’tega Ogra, Senior Special Assistant to the President on Digital/New Media via his twitter handle explained that the deal with Afreximbank would enable NNPC Ltd to defray taxes and loyalties in advance.
Ogra said it would also provide the government with dollar liquidity to stabilise the naira with limited risk.
He further gave an insight saying that the emergency three billion dollars crude oil repayment loan was not a crude-for-refined products swap but an upfront cash loan against proceeds from a limited amount of future crude oil production.
He said it would not pose any risk, adding that 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,” he said.
On the benefit of the loan to Nigerians, Ogra said it would assist NNPC Ltd. in settling taxes and royalties in advance and also equip the Federal Government with the necessary dollar liquidity to stabilise the Naira, with limited risk.
Ogra said the funds would be released in stages or tranches based on the specific needs and requirements of the Federal Government.
“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.
“A stronger Naira will result in lower prices from the current level, making subsidies unnecessary. The deregulation policy remains unchanged,” Ogra added.
