The Nigerian National Petroleum Company Limited (NNPCL) is set to finalize a $2 billion syndicated loan to stabilize its finances and fund critical investments in new oil installations aimed at boosting crude oil production, Africa Intelligence has reported.
However, this development has sparked curiosity and debate, particularly as the state-owned oil company recently declared a profit of over N3 trillion ($3.9 billion) for 2023.
The loan, dubbed Project Leopard, is being raised in two tranches of $1 billion each. While the first tranche has already been concluded, the NNPCL is finalizing the second tranche to complete the financing. The crude oil-backed loan, which has been in the works since July, is aimed at restoring the NNPCL’s financial stability and enabling investments in oil infrastructure to increase crude oil output.
Speaking in July, NNPCL Group CEO Mele Kyari explained that the loan was a routine financing arrangement for the company’s business needs rather than a desperate move.
“We have no problem covering our gasoline payments. This is just money for normal business and not a desperate act. It will be a syndication with critical but regular partners who have been in business with our company to forward the cash,” Kyari said at the time.
The company has yet to make an official announcement regarding the deal’s finalization, and fresh efforts to obtain a response from NNPCL representatives have so far been unsuccessful. Chief Corporate Communications Officer Olufemi Soneye earlier stated that the company would adhere to due process and announce financing arrangements when ready.
The NNPCL’s decision to pursue a $2 billion loan has stirred curiosity, particularly following its declaration of over N3 trillion in profit for 2023. This profit figure, announced earlier in the year, marked a significant milestone for the company and was widely celebrated as evidence of improved efficiency and business management under Kyari’s leadership.
However, the contrast between the company’s reported profitability and its need to secure fresh funding has raised questions among industry stakeholders and the public.
Some analysts have suggested that the profit declaration, while impressive, may not fully capture the company’s liquidity challenges or the high costs of maintaining and expanding oil production in a capital-intensive sector. Additionally, critics argue that the NNPCL’s financial disclosures lack sufficient transparency to provide a clear picture of its fiscal health.
Boosting Crude Oil Production
The funds raised through Project Leopard are expected to support Nigeria’s goal of increasing crude oil production, a crucial revenue source for the country. The federal government has set an ambitious target of producing 2 million barrels per day (bpd) by the end of 2024, up from the 1.7 million bpd recorded in November.
NNPCL plans to use the loan to finance new drilling campaigns and upgrade existing oil installations, ensuring the company can meet its production targets.
“Our financing arrangements are typically announced through our financial advisers and arrangers. When the time comes, new financing transactions will be announced to the market,” Soneye said earlier.
The loan has attracted significant interest from key industry players, including Nigeria’s Oando Group, led by Adewale Tinubu, and the Abu Dhabi National Oil Company (ADNOC). Both entities declined to comment when contacted, while Afreximbank, which participated in NNPCL’s earlier financing efforts, also refrained from confirming its involvement.
In its earlier Project Gazelle, the NNPCL secured $3.175 billion in funding from a consortium that included Oando, Swiss trader Gunvor International, and Nigeria’s Sahara Energy Resources. However, the high interest rate of 11.58% on that loan drew criticism, including former Vice President Atiku Abubakar, who described the arrangement as “shady.”
By comparison, Nigeria’s recent Eurobond issue raised $1.5 billion at a slightly lower interest rate of 10.375%. Kyari has expressed optimism that the NNPCL will secure more favorable terms for Project Leopard, with the loan to be backed by the sale of 30,000-35,000 barrels of crude oil daily.
Transparency and Accountability Concerns
The NNPCL’s pursuit of external financing has reignited concerns about the transparency and accountability of its financial operations. Many have argued that a more detailed breakdown of the company’s financial health is needed to justify its reliance on external loans despite reporting substantial profits.
Atiku and other stakeholders have consistently called for greater scrutiny of the NNPCL’s operations, warning that opaque financial practices could undermine the company’s credibility and the broader Nigerian oil industry.
