Afreximbank Begins Disbursement Of NNPCL’s Syndicated US$3.3bn Crude Prepayment Facility

Multilateral trade finance institution, the African Export-Import Bank (Afreximbank) on Friday said it has made an initial disbursement of US$2.25bn it successfully syndicated under the US$3.3bn crude oil prepayment facility sponsored by the Nigerian National Petroleum Company Limited (NNPCL).

The balance US$1.05bn second tranche of the landmark financing, which the bank said is the largest syndicated loan ever raised by Nigeria in the International market and one of the largest syndicated debts raised in Africa in recent years, is to be disbursed subsequently.

The Facility is expected to enhance Nigeria’s macroeconomic stability and long-term economic growth, while enabling access to raw materials and trade development efforts, Afrexim said in a statement by the group.

Raising such a significant and landmark financing, Nigeria’s largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023, at year-end when many financiers are closing their books, it said, represents a vote of confidence on Nigeria and Africa. Investors were keen to consider ticket sizes of between US$250m and US$500m amidst current headwinds and year-end pressures in the loan markets.

Other initial participating lenders included Gunvor International BV, a Geneva-based multinational energy and commodities trading company and Sahara Energy Resources Limited, an African-owned, leading international energy and infrastructure conglomerate.

The five-year facility carries a margin of 6.0% per annum above the three-month secured overnight financing rate (SOFR), just as the transaction structure has an embedded price balance mechanism where 90% of all excess cash from the sale of the committed barrels (after debt service) will be released. The balance will be used to prepay the facility, effectively shortening the final maturity of the facility and freeing cashflow from future pledged cargoes for use by Nigeria.

Afreximbank said its extensive structuring and technical experience in arranging similar complex oil and gas financing facilities in Angola, Republic of Congo, South Sudan, Chad Egypt, Cote d’Ivoire, and Ghana, among others was brought to bear in the successful closure of the facility, notwithstanding a very challenging market environment.

The bank acted as Sole Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Inter-creditor Agent and Collateral Agent, while United Bank for Africa Plc acted as the Local Arranger and Onshore Account Bank.

While lauding the successful financial close, Afreximbank’s President and Chairman, Prof. Benedict Oramah, said the “facility further demonstrates the bank’s commitment to supporting African economies when such assistance is most needed.

“Afreximbank stands by its member countries in good and in difficult times. The disbursement of the initial US$ 2.25bn under the facility will support Nigeria’s long-term economic stability, ease access to import financing for raw materials and essential goods, support Industrialization and trade development efforts. We are pleased that despite the typical year-end encumbrances, our partners and investors  rallied and raised the funds required in record time. We thank them for their support”.

Also commenting, NNPCL’s Group Chief Executive Officer, Mele Kolo Kyari said the proceeds of the landmark “facility have been made available to the Federal Republic of Nigeria as one of several efforts towards improving macro-economic stability. The participation of global, international and regional syndication firms is a further testament to the lending market’s appetite for financing sponsored by NNPCL and signifies solid market confidence in Nigeria.”

Group Managing Director/CEO, UBA Plc, Oliver Alawuba, expressed delight at participating “in this transaction which accentuates its commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria.”