… stakeholders react
Olusola Bello
The move by the Nigerian National Petroleum Corporation NNPC Limited to secure $5 billion from Afreximbank has elicited mixed reactions from many stakeholders.
While some felt such action would lead to openness and transparency in the operations of the company, others want the NNPC to name in specific terms projects it intends to use the facility for.
According to Dr. Godswill Ihetu, former group executive director of NNPC, managing director NLNGs, and also the former chairman of Lagos Petroleum Club, he said: “Great news. Now that NNPC is a limited liability company, these kinds of loans are available to be taken on its balance sheet. Although details are not stated, it will go into beefing up upstream sector, presumably in areas that would result in an increase in production, especially as Nigeria struggles to meet its OPEC quota. Repayment is from crude oil allocation which is appropriate”
In his own reaction, the managing director of Emerald and Energy Resources, Abiola Ajayi, said, in principle, this is good news for the industry as traditional fund providers are now turning their backs on d crude oil extractive industry. “This development will provide security for players with better corporate governance in that they can get funding for their development project
As for NNPC, they would have to step up on their corporate governance performance if they would expect a long term relationship with the bank”
Also, Dr. Diran Fawibe, chairman and chief executive of International Energy Services Limited, said that the whole essence of the exercise is for NNPC to be able to financial institutions to raise money for its projects ad also present its balance sheet.
“There so many organizations, even international Oil Companies also go to financial institutions to raise capital. What the NNPC has done is normal as it is no longer depending on the government. It is self-accounting, and this is what a limited liability company should do under the Companies and Allied Act.
Another former NNPC staff who spoke on the matter said this is not a regular loan facility. He described the loan as Forward Sale Agreement (FSA) which is not attached to specific project.
It is a kind of Memorandum of Understand (MoU) which is meant to enable the bank to help NNPC look for money as a Financial Adviser, he said. In order words, it is to ensure that the company is not starved of money, especially now that the government has decided not to remove subsidies.
Africa Energy Chamber, while reacting to the development, said: “The financial commitment follows the implementation of the country’s Petroleum Industry Act, which aims to boost the NNPC’s upstream portfolio.
“The African Export Import Bank (Afreximbank) has announced a $5 billion financial commitment with the Nigerian National Petroleum Corporation (NNPC), enabling the Corporation to kickstart investment in Nigeria’s oil and gas sector. With the NNPC looking to expand its upstream portfolio, the funding will be critical for the Corporation as it steps up investments in new and strategic prospects.”
The NNPC has set clear targets for upstream developments, of which a few include increasing revenue for the country and investing in strategic upstream oil and gas producing assets. With the Corporation’s funding strategy aimed at raising between $2.5 billion and $3 billion to fund upstream investments, the commitment by Afrieximbank is significant.
Following international oil company divestment from oil and gas assets and production declines at mature fields across the country, the Nigerian government has reaffirmed its commitment to spurring investment and development in Nigeria. With the implementation of the Petroleum Industry Act (PIA) in 2021, the country has not only outlined a clear strategy for sectoral development, but made a strong case for investment through the implementation of attractive terms and ensured transparency.
The financial commitment made by Afreximbank serves to promote the effectiveness of the PIA, while at the same time representing a step in the right direction for African oil and gas investments. With international financial institutions reducing capital expenditure for fossil fuels projects, countries such as Nigeria – with over 36 billion barrels of oil and 200 trillion cubic feet of natural gas – stand to lose out.”
Accordingly, the role of African financing institutions has been emphasized, with entities such as Afreximbank having a critical role to play.
“This commitment is a step in the right direction for Nigeria. This level of commitment not only reaffirms the potential of the country’s upstream sector, but emphasizes the capability of African financial institutions. However, this is only the beginning, and a lot more needs to be done to ensure the continent fully exploits its immense resources,” states NJ Ayuk, Executive Chairman of the AEC.