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Nigeria to repay $1.5bn loan with 30,000 barrels of oil per day for 5 years

State-owned Nigerian National Petroleum Corporation (NNPC) has signed a $1.5 billion oil prepayment pact midwifed by Standard Chartered and backed by oil traders, Matrix Energy and Vitol Group, insiders said, the country’s first deal of this nature since the pandemic outbreak, Reuters reported Tuesday.

The deal offers Africa’s biggest oil producer access to much-needed cash after its finances took a pounding from an oil crash in April and coronavirus lockdowns depleted world’s oil demand by roughly one third.

Christened Project Eagle, the funding arrangement was also supported by United Bank for Africa (UBA) and African Export Import Bank (Afrexim).

Matrix and Vitol individually receive 15,000 barrels per day (bpd) of oil as repayment over a five-year period from August.

Nigeria’s daily crude production is in the neighbourhood of 2 million.

Nigerian marketer Matrix confirmed its involvement in the deal. Rotterdam-based Vitol, the world’s biggest independent oil trader, refused to comment so also did a frontman for Standard Chartered. Afrexim did not give an immediate comment.

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NNPC and UBA did not immediately respond to questions.

Prepayments with traders are commonplace in commodity finance considering that banks see them to be one of the more reliable means of lending in countries perceived as risky.

These loans are convenient for obtaining long-term supplies and stimulating razor-thin margins.

NNPC has essayed to borrow through prepayments with traders for years. Yet, the lack of transparency in the firm’s finances and steep gasoline subsidies have made it difficult for it to get secure private financing on attractive terms. Nigeria ended subsidies earlier this year.

NNPC will commit a great deal of the fund to settle taxes its unit NPDC owed, the sources said.

The rest will be used for operational expenses and capital expenditure. One of the sources said money from the pre-payment could fund a revamp of the Port Harcourt refinery.

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