By Bassey Udo
The Nigerian National Petroleum Company Limited on Monday signed a $1.04 billion with African Export-Import Bank (Afreximbank) to finance its efforts to explore for more oil and create more opportunities to boost Nigeria’s oil production capacity.
The deal was sealed in Durban, South Africa during the ongoing second intra-Africa trade fair. Executive Director and Group Chief Executive Officer of the NNPC, Umor Ajia, signed the agreement along with the Executive Vice President, Business Development & Corporate Banking, Afreximbank, Amr Kamel.
At the current prevailing importers & exporters windows exchange rate approved by the Central Bank of Nigeria (CBN) as at Wednesday, November 17, 2021, the deal is valued in Naira at about NN428 billion.
With the declining rate of Nigeria’s oil production capacity now a subject of concern to the government as a result of the devastating impact of COVID-19 pandemic on the global oil market, analysts say the deal was conceived to boost NNPC’s output and attempt to help the country regain its pre-COVID 19 output rate.
Since the beginning of the second half of 2021, the Organization of Petroleum Exporting Countries (OPEC) said Nigeria has seen its oil production capacity declining consistently.
Prior to the COVID-19 pandemic, the country was producing an average of 1.79 million barrels of crude oil per day, down from the proven capacity of about 2.3 million barrels per day.
Following an agreement by members of OPEC and their allies in the non-OPEC group led by Russian, the figure dropped to about 1.58 million barrels per day in 2020.
This followed the resolution by the group to cut back global oil production, including those of its members, in an attempt to stabilize the oil market and firm up prices, which crashed to an all-time low level at the peak of the pandemic.
The agreement is expected to run its course till April 2022.
Last July, the output figure dropped further to about 1.39 million bpd and again to about 1.296 million bpd before recording a marginal improvement to about 1.45 million bpd in September.
With the recent transformation of the NNPC into a public limited liability company with a new business orientation following the enactment of the Petroleum Industry Act (PIA) by President Muhammadu Buhari, the Mele Kyari-led management appeared under fresh pressures from the challenges posed by its new status.
One of those challenges is the drive to discover new locations for oil exploration and production to significantly raise its output capacity in the near future.
Details of the latest Pre-Export/Shipment Finance Facility transaction with Afreximbank, MEDIATRACNET learned, was underpinned by a Forward Sale Agreement (FSA) and Offtake Contracts from the NNPC acting as the Borrower and Seller.
Under the FSA, the NNPC is expected to deliver 35,000 barrels of crude oil per day.
“The proceeds of the facility will boost tax revenues and foreign currency receipts and create thousands of jobs in the oil and gas refining value chain, all by more than US$2.4bn to the immediate benefit of the government, thereby improving the balance of trade and Gross Domestic Product in Nigeria – Africa’s largest economy,” Afreximbank said in a statement.
The bank said the deal would promote local content in Africa’s Oil and Gas and other mining industry and generate foreign receivables into Africa.
Afreximbank President and Chairman of the Board of Directors, Benedict Oramah, lauded the deal as “very innovative”, adding that the Bank’s decision in the context of the world’s climate change agenda, was a case requiring the adoption of a balanced approach.
Africa, Oramah said, is more of a victim than a perpetrator in the emission of destructive greenhouse gases, with a contribution of only about 4 percent of the global volume.
A majority of the continent, ironically, he noted, have been left behind, development-wise, still having to depend on fossil fuel for survival. He said Africa should not be allowed to bear the brunt of the punishment for the mistakes of others.
“Stopping development for parts of Africa today to achieve a clean environment for the whole world tomorrow is utterly foolhardy,” said Oramah.