Boost For Naira as Afrexim Bank, UBA Disburses $2.25 Billion NNPC Loan
- The Afrexim Bank has confirmed the disbursement of the first tranche of $2.25 billion of the crude oil swap deal with NNPC
- The bank stated that the disbursement is a milestone in helping Nigeria as it battles forex crunch
- The deal carries a margin of 6.0% per annum above the 3-month secured overnight financing rate
Pascal Oparada has over a decade of experience covering Tech, Energy, Stocks, Investments, and Economy.
Afrexim Bank has disclosed the successful disbursement of the first tranche of the $3.3 billion crude oil repayment loan to the Nigerian National Petroleum Company Limited (NNPC).
The bank stated that the initial disbursement was about $2.25 billion, while the final disbursement of $1.05 billion is expected later.
Source: Getty Images
The loan attracts a 6.0% interest rate per annum
The bank described the loan as a milestone, Nigeria's largest crude oil repayment facility, and one of the most significant syndicated loans raised in 2023.
The bank said:
"Investors were keen to consider ticket sizes of $250 million and $500 million amidst current headwinds and year-end pressures in the loan markets."
Per the terms for the 5-year facility, it carries a margin of 6.0% per annum above the 3-month secured overnight financing rate.
Also, the transaction structure has an embedded price balance instrument where 90% of all excess cash from the sale of the committed barrels is used to repay the facility.
Afrexim stated that the arrangement would shorten the loan's final maturity and free cash flow from Nigeria's future pledged crude oil cargoes.
According to a report by Leadership, the participating lenders included Afrexim Bank, Gunvnor International BV, and Sahara Energy Resources Limited.
NNPC hopes to use the facility to boost the Forex market
The bank stated that its extensive structuring and technical experience in arranging similar complex oil and gals financing facilities in Angola, Republic, South Sudan, Chad, Egypt, Cote d'Ivoire, and Ghana played a critical role in the global financial market.
The Nigerian government has hoped for the deal to offset forex backlogs, which experts blame for the woeful performance of the Nigerian currency.
NNPC said the facility would boost liquidity in the Forex market and boost the local currency's performance against the US dollar and other major currencies.
The naira has experienced troubled times since the Nigerian government began the forex reforms, which saw it lose 55% of its value against the dollar since June 2023.
"Clearing backlogs": $2.2bn Afrexim bank loan lifts Nigeria’s External reserve, reverses naira's loss
Legit.ng reported that Foreign exchange reserves increased to $33.042 billion as of January 3, 2024, according to data from the Central Bank of Nigeria (CBN). This is up from $32.912 billion on Friday, the final trading day of 2023.
According to a BusinessDay report, this coincides with the reception of the African Import-Export Bank (Afreximbank) loan announcement, which has helped boost reserves.
Recall Punch reported that the federal government received a $2.25 billion foreign exchange support facility from the Afreximbank.
PAY ATTENTION: Unlock the best of Legit.ng on Pinterest! Subscribe now and get your daily inspiration!
Source: Legit.ng
