May 26, 2024

EXPLAINER: NNPCL secures $3bn Afrexim facility to defray its taxes, royalties in advance- Presidency 

 

Oredola Adeola

 

The Federal Government has explained that the $3 billion loan secured by the Nigerian National Petroleum Company (NNPC)Limited from Afreximbank will enable the national oil company to defray taxes and royalties in advance and provide immediate disbursement to support the government’s ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.

 

 

Ajuri Ngelale, Spokesperson & Special Adviser to President Bola Tinubu made this known on Wednesday in reaction to the loan obtained by NNPCL from Afreximbank.

 

 

EnergyDay had earlier reported that the NNPCL on Wednesday, secured afreximbank commitment letter and term sheet for an emergency $ 3 billion crude oil repayment loan at the bank’s headquarters in Cairo, Egypt, to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.

 

 

President Tinubu’s SSA media therefore revealed that the loan will provide the Federal Government with USD liquidity to stabilize Naira via incremental releases based on FGN needs.

 

 

He said, “This new FX accretion is to enable NNPCL to defray taxes & royalties in advance and provide the FGN w/ USD liquidity to stabilize NGN via incremental releases based on FGN needs. Stronger NGN = Lower Fuel Costs.

 

 

Ngelale emphasised that the Afrexim loan is a major buffer against the need to re-engage in the subsidy regime.

 

O’tega Ogra, Strategic,  Senior Special Adviser on Digital/New Media to President Bola Tinubu, explaining further noted that there are no sovereign guarantees tied to this loan, emphasising that the Afrexim funds will be released in stages or tranches based on the specific needs and requirements of the Federal Government.

 

Ogra further noted that is not a crude for refined products agreement where the government does not earn any proceeds from the swap.

 

The SSA Media said “This is not a crude-for-refined products swap but an upfront cash loan against proceeds from a limited amount of future crude oil production.

 

“The loan is not risky for NNPC Ltd. or the Nigerian Treasury. The exposure for NNPC Ltd. is very limited, covering just a fraction of their entitlements, ” Ogra said.

 

NNPC AND FAILED REMITTANCES

 

The NNPCL has over the years failed to remit royalty, taxes and other revenue to the Federal Government until May 2023.

 

In November 2022, former Governor of Kaduna State, Mallam El-Rufai blamed NNPC for failure to remit revenue into the federation’s account since the beginning of the year, putting many states into severe financial distress.

In February 2022, a NEITI policy brief highlighted that over USD 20 billion government revenue from NNPC was not remitted, which generated a national dialogue.

In May 2023, NNPC was said to have failed to remit N2.1 trillion to FAAC.

 

In July 2023, NNPC Limited remitted N123 billion to the Federal Government.

In the same month, RMAFC Chairman Mohammed Shehu was quoted as saying that NNPC did not remit N8.4 trillion due from oil proceeds between January 2022 and May 2023. 

In June 2023, a panel was set up to reconcile the controversies surrounding the about N4.2 trillion debt the federal government allegedly owes NNPC. 

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