Why NNPC is reportedly seeking another $2 billion crude oil loan

• The Nigeria National Petroleum Company Limited (NNPC) is reportedly seeking a new $2 billion loan with crude oil as the collateral
• The report said that NNPC boss Mele Kyari disclosed that the Loan would be used to support the company's business activities and production
• The Loan is pledged against 30,000-35,000 daily crude oil production by the NNPC 

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

The Nigeria National Petroleum Company Limited (NNPC) is reportedly considering securing a new $2 billion loan using crude oil as a down payment.

The company’s group chief executive officer, Mele Kyari, disclosed that the oil firm wanted a daily loan against 30,000-35,000 barrels of crude oil production but did not say how much money NNPC was requesting.

Group Chief Executive Officer of NNPC, Mele Kyari, says loan would be used for company's activities Credit: NNPC Ltd
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NNPC boss discloses reason for Loan

Kyari said the cash would be used for the firm’s business activities, including production growth, a BusinessDay report said.

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He said:

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

A Reuters report said that NNPC owes about $6 billion in backlog payments to oil marketers. Analysts say this might be responsible for the current scarcity across the country, as many marketers have stopped sales.

NNPC reportedly owes $6bn in backlog payments

The Reuters report said the national oil company owes several international petrol suppliers, most of whom have recently stopped participating.

The NNPC denied that it owes any marketer, calling the report fake news as it failed to mention the marketers it owes.

According to reports, the loan would be syndicated with critical partners in the company's business to forward the cash.

Previous oil-backed Loan from NNPC

Legit.ng reported that the NNPC had secured a $3.3 billion crude repayment loan from the Afrexim bank to support the naira and stabilize the foreign exchange market.

The Loan was also targeted at supporting the Nigerian government’s monetary and fiscal policy reforms.

Last week, the NNPC declared a state of emergency on crude oil production. 

Speaking at the ongoing 2024 Nigeria Oil and Gas (NOG) Energy Week in Abuja on Tuesday, June 2, NNPC Ltd's group chief executive officer, Mele Kyari, declared a decisive move to address forces and challenges hindering crude oil production in the country. 

According to the NNPC Limited boss, Nigeria can conveniently produce two million barrels of crude oil daily without deploying new rigs.

However, Energy experts say the loan may be unnecessary, especially since the country hardly meets its daily OPEC quota.

"Pledging the country's crude in debt again will be an anomaly because we hardly produce enough for export and now, the NNPC want to produce to pay or take loans. That is an absurdity taken too far," Adeola Yusuf, an energy policy expert says.

According to him, the NNPC should concentrate on producing enough and it can use the excess crude for any collateral.

"The Dangote Refinery is importing crude from abroad while Nigeria wants to swap its own for a loan. Why don't you ask Dangote to give you the $2 billion while you supply him crude to lower the cost of petrol in Nigeria?

Depots hike costs to N720 per litre

Legit.ng earlier reported that Abuja residents are currently grappling with petrol scarcity as the commodity has become scarce and sells at higher prices.

Findings show that some petrol stations sold the product for N800 per litre as of Sunday, July 7, 2024, except for NNPC stations, whose prices remained at N617 per litre.

Black marketers around some filling stations sold petrol for as high as N1,000 per litre as customers formed long queues in several stations in the nation’s capital.

Source: Legit.ng