Former Vice President Atiku Abubakar has raised concerns about the lack of transparency surrounding the $3.3 billion emergency loan secured by the Nigerian National Petroleum Company (NNPC) last year from Afreximbank.

In a post titled “Tinubu’s administration owes Nigerians an explanation for the NNPC $3.3bn emergency loan,” shared on X Thursday, Abubakar called on President Bola Tinubu’s administration to clarify the framework and details of the loan, expressing curiosity over the government’s silence on the matter.

The emergency loan, secured on August 16, 2023, was intended to boost the performance of the naira in the foreign exchange market, as stated by the NNPC. The deal is supposed to be a crude-for-cash loan arranged by the African Export-Import Bank.

However, the former presidential candidate of the Peoples Democratic Party (PDP) pointed out that the Nigerian government has remained tight-lipped about the deal, with information disseminated solely through unofficial sources from the NNPC.

One notable aspect of the transaction is the involvement of a Special Purpose Vehicle (SPV) named Project Gazelle Funding Limited, incorporated in the Bahamas. Abubakar questioned the choice of registering the company in the Bahamas, given the country’s recent association with financial scandals like the Paradise Papers.

“What is even more confounding about this deal is why the Federal Government would register a company in the Bahamas, knowing full well the recent scandal of the Paradise Papers that involved that country,” he said.

According to available information, the SPV is the borrower, with NNPC as the sponsor, agreeing to repay the loan through crude oil at an interest rate slightly exceeding 12 percent, he further remarked.

Abubakar expressed concern about the details of the deal, especially given Nigeria’s daily crude production of 1.38 million barrels and the commitment to supply 90,000 barrels daily from 2024 until reaching 164.25 million barrels for loan repayment.

The former vice president highlighted a significant discrepancy in the repayment amount, estimating a staggering $12 billion based on Nigeria’s crude benchmark price of $77.96 per barrel in 2024.

“Now, this is where the details get disturbing because Nigeria’s benchmark for the sale of crude per barrel in 2024 is $77.96. A simple multiplication of that figure by 164.25 will give us a whopping $12bn,” he said.

“It is inconceivable that the Federal Government will lead the country to take a loan of $3.3b with an interest rate that is not more than 12 percent, but with estimated repayment amounting to $12bn.

“That is a humongous differential of about $7b between what is in the details of the deal on paper and what indeed is the reality.”

Abubakar emphasized the need for the federal government to address the unclear aspects of the deal, calling it into question and urging transparency.

“There are questions to be answered on the integrity of this deal, and we earnestly request the Federal Government to talk directly on these cloudy details behind the deal,” he said.

In his statement, the PDP chieftain demanded, “on behalf of the ordinary people of Nigeria, that the Federal Government provides answers to the following questions.”

1. Has the Federal Government accessed the loan?
2. Is the loan in the government’s borrowing plan as approved by the National Assembly?
3. Who are the parties to the loan, and what specific roles are they expected to play?
4. What are the conditions of the loan, including tenor, repayment terms, the collateral, and the interest rate?
5. And, lastly, why register an SPV in the Bahamas knowing the recent scandal of the country’s notoriety for warehousing unclean assets?

Atiku is not the only Nigerian who has voiced concerns over the loan. Several analysts have said that there is more to the deal than meets the eye, and the federal government owes Nigerians some explanations. Kelvin Emmanuel, CEO of Dairy Hills, an energy expert and financial analyst, had earlier expressed concerns about the legality and implications of the loan.

Emmanuel meticulously examined the loan agreement, identifying inconsistencies that he deemed could establish a perilous precedent for the economy. He drew attention to elements like the daily allotment of crude, the overall repayment duration, the configuration of the Special Purpose Vehicle (SPV), and the management of price differentials between forward sales and spot prices.

In his analysis, Emmanuel postulated that the transaction structure might be forming a pseudo-excess crude account, potentially depriving Nigeria of the advantages associated with fluctuations in the global oil markets. He expressed disapproval of loans secured by resources and drew a parallel between the forward sales agreement and the financialization of future oil and gas assets.

“I am NOT a fan of resource-backed loans, and this forward sales agreement that is akin to financialization of future oil and gas assets is an anomaly in statecraft that the National Assembly should fight with all rigor,” Emmanuel remarked. “There is no genius in it; it is a lazy approach to getting FX dollars to improve your balance of payment position.”

As the call for transparency intensifies, the public awaits a response from the authorities to shed light on the intricacies of the NNPC’s $3.3 billion emergency loan. In December, the NNPC reportedly received $2.5 billion tranche of the loan. The company, last week, unveiled its strategy for deploying the loan.

As Nigeria steps into the promising yet challenging economic terrain of 2024, PwC Nigeria, a leading professional services firm, has unveiled its highly anticipated report titled “Seven trends that will shape Nigeria’s economy in 2024 – PwC’s Economic Outlook.”

In its analysis, PwC delves into the intricacies of Nigeria’s economy, identifying seven key trends that will play pivotal roles in shaping the nation’s economic trajectory throughout the year.

PwC anticipates marginal GDP growth of 3.1% for the year 2024, attributing this positive outlook to sustained policy reforms.

Despite the growth prospects, the forecast acknowledges constraints posed by heightened economic pressures. The driving forces behind this projection include ongoing reforms, recovering oil production, and a proactive policy environment.

However, potential risks loom, including a sustained increase in fiscal debt, elevated interest rates, high inflation, foreign exchange liquidity pressures, and challenges in non-oil revenues and sector development.

Sector-wise, the financial services, information and communication, and utilities sectors have emerged as key drivers of GDP growth. PwC projects that these sectors will maintain their growth momentum in the short term, contributing significantly to Nigeria’s overall economic growth.

The seven trends

1. Executing Fiscal Reforms: Balancing Ambition with Budgetary Implementation

PwC’s Economic Outlook notes the critical importance of fiscal reforms in achieving Nigeria’s ambitious revenue targets for 2024.

While historical challenges have seen actual revenue fall below budgeted figures, the report highlights the potential of proposed fiscal reforms in boosting non-oil revenue.

However, the success of these reforms is contingent upon effective budgeting and execution, with factors such as OPEC oil production quotas, international oil prices, and security in oil-producing regions acting as determining factors for the realization of budgeted oil revenue.

“Nigeria’s ambitious revenue targets for 2024 depend heavily on oil prices and reform implementation,” the report said. “Historically, actual revenue realized has averaged less than 70% of the total budget. Achieving budgeted oil revenue in 2024 will depend on OPEC oil production quota, international oil prices, improved security in the oil-producing regions, and geopolitical factors.”

2. Evolving Monetary Policy Stance: Finding the Right Framework for Price Stability

Despite the Central Bank of Nigeria (CBN) deploying various monetary policy tools, inflationary pressures persist. PwC advocates for an independent pursuit of inflation goals by the CBN, emphasizing the need for coherence and alignment between fiscal and monetary policy to stabilize prices.

Clarity, transparency, and consistent communication from the CBN are identified as crucial elements for enhancing stability in exchange rates and market activities.

“Finding coherence and alignment between fiscal and monetary policy to stabilize prices may enable the achievement of statutory and policy targets in 2024,” the report said.

3. Investors will be cautiously optimistic

The report further notes that as Nigeria positions itself on the global economic stage, foreign portfolio investment flows may remain cautious. This is influenced by challenges such as delays in capital repatriation, and downgrades from FTSE Russell and MSCI, investors’ outlook may be tempered.

Nevertheless, Moody’s, Fitch, and S&P maintain a speculative credit rating, providing a nuanced view. The report anticipates improvements in Foreign Direct Investment (FDI) flows in 2024, driven by expansions in the ICT and Manufacturing sectors.

4. Undulating pathways to unlocking productivity in the economy

Despite the nation’s aspirations for economic growth, limited fiscal space for public investment and difficulties in attracting private investments continue to constrain essential infrastructure improvements.

The allocated infrastructure spending budget for 2024 falls short of recommended benchmarks, impacting the realization of crucial projects. Security spending, totaling N14.8 trillion over the past nine years, has not effectively mitigated insecurity, adversely affecting national stability and investor confidence.

“The allocated infrastructure spending budget for 2024 is N1.32 trillion, falling short of both the World Bank’s suggested 70% infrastructure-to-GDP benchmark (currently at 30%) and the yearly $150 billion requirement specified in the National Integrated Infrastructure Master Plan for 2021- 2025,” the report notes.

5. Persisting vulnerability to external pressures with a potential of ‘shocks’

According to the report, Nigeria remains susceptible to a range of external pressures, including geopolitical, economic, environmental, political, and trade trends.

The escalation of the Russia-Ukraine war, for instance, could lead to global energy and commodity supply risks, impacting inflation and food security. The outcomes of elections in key countries like the USA, UK, and Taiwan may shape global trade and capital flows, presenting both challenges and opportunities for Nigeria’s economic outlook.

The report adds that “Nigeria may experience increased inflation and food security challenges due to grain import disruptions and high petroleum product cost.”

6. Consumers may likely adjust better to the evolving policy and macro realities

In the face of increasing prices of goods and services coupled with lower disposable income, consumer spending in 2024 is expected to come under pressure, according to PWC.

Private consumption, however, is expected to be marginally better than in 2023. The report projects an increase in poverty levels to 38.8%, driven by low consumer spending and purchasing power, exacerbated by the absence of a commensurate increase in the minimum wage.

7. Improved sectoral development riding on reforms

PwC projects marginal GDP growth of 3.1% in 2024, underpinned by sustained policy reforms, recovering oil production, and a proactive policy environment.

While the financial services, information and communication, and utilities sectors have been the main drivers of GDP growth, the report anticipates these sectors continuing to propel short-term growth.

However, potential downside risks include fiscal debt, elevated interest rates, high inflation, foreign exchange liquidity pressures, exposure to global value chain shocks, and poor non-oil revenues.

The firm projects that “sectoral growth will be driven by a combination of demand dynamics, investment, government reforms and trade dynamics.”