Friday, Sep 18th 2020 1:39 PM

Market Digest Nigeria


NPDC gets $1bn funding for upstream operations

The Nigerian National Petroleum Corporation (NNPC) Thursday night declared it had secured a prepayment funding of around $1 billion to boost the upstream operations of its subsidiary, the Nigerian Petroleum Development Company (NPDC).

NNPC said the crude oil prepayment had helped it meet its NPDC’s tax payment obligation estimated at about $700 million to the Nigerian government while the balance had been committed to finance NPDC’s capital and operating expenditure.

In a statement issued by Kennie Obateru, its spokesperson, the state-owned firm noted that the prepayment financing would be backed by future oil production of NPDC.

It added that it would adopt a well-established structure to enable the buyer of the crude, Eagle Export Funding Limited, to source financing in the domestic and international markets in order to fund an upfront payment to NNPC under a Forward Sale Agreement.

The financing, which funded the prepayment, is structured over two tranches namely: five-year USD amortising tranche (Tranche 1) and a seven-year NGN amortising tranche (Tranche 2).

The two tranches benefit from a cash sweep with the seven-year tranche having a one-year non-call period.

Repayment, the NNPC said, would come from the sales proceeds of the NPDC crude, which are backed by Letters of Credit, issued by banks with a minimum credit rating, in line with market precedent.

The export price for the crude is the relevant NNPC Official Selling Price for the corresponding calendar month and crude gauge.

Participants in the Eagle Export Funding Limited deal include Standard Chartered Bank, United Bank for Africa, Union Bank, Afrexim Bank and two oil trading firms, Vitol and Matrix Energy.

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