By Emmanuel Nduka
The Nigerian National Petroluem Company (NNPC) Ltd has secured a $5bn corporate finance commitment from the African Export Import Bank (Afreximbank) to fund major investments in Nigeria’s Upstream sector.
The commitment is a fallout of the meeting between the Chairman of the Board of Directors and President of the Afreximbank, Benedict Oramah; and the NNPC Ltd team led by the Group Managing Director/Chief Executive Officer , Mele Kyari, in Cairo, Egypt on Wednesday.
The funding is also a major milestone achievement in the quest for the corporation to scale up investments in the oil and gas industry, following the commencement of the implementation of the Petroleum Industry Act (PIA).
The NNPC’s $5bn corporate finance commitment from Afreximbank is seen by oil industry stakeholders as a dividend of the PIA and the incorporation of the NNPC as a limited liability company.
Following the assent of President Muhammadu Buhari to the PIA on August 16 last year, the NNPC LTD was subsequently incorporated by the Corporate Affairs Commission on September 22 the same year, after it received application for its registration from the Nigerian Government.
Thus, the new legislation has provided business opportunities that will enable the NNPC earn more revenue for the country and attract foreign direct investment into the Nigerian energy sector.
The PIA has also raised stakeholders expectations on the company, even as it has given it a wide room to stimulate investments in the oil and gas industry.
Under the NNPC Ltd funding strategy for selected upstream investments, the Company would be raising between $3.5bn and $5bn as corporate finance to fund major upstream investments.
The NNPC plans to take over ownership from non-investing partner through acquisition of pre-emption rights in the sample Joint Venture to achieve this objective.
This strategy would also see the company investing in assets to address integrity, bottlenecking and growth issues including rig-less activities, and drilling campaigns in the oil industry.
Part of the funding would also be used to finance part of the NNPC’s investment, including acquisition of interest in quality upstream oil and gas producing assets.
The acquisition itself, is an integral part of the NNPC’s corporate strategy to rebalance its portfolio by divesting from some toxic assets to acquire choice strategic assets that will help support its long term strategic objectives.
Meanwhile, the repayment of the funding is expected to be done through a Forward Sale Arrangement whereby the funds provided to constitute the payment purchase of 90-120kpd of crude to be delivered to the lender over a period.
It is projected to be made within a four to eight-year period with an objective to ensure major fiscal obligations and operating expenses are discharged appropriately.
The NNPC and Afreximbank among other things, also agreed to deepen the business collaboration between the two institutions.
The bank agreed to enter into a finance advisory and fundraising role to raise $5bn towards the “acquire, invest and operate energy producing assets in Nigeria as part of NNPC’s growth strategy following its incorporation as a limited liability company.”
Afreximbank will also underwrite $1bn as part of forward sales base trade finance transaction as part of the landmark transaction.
