Nigerian National Petroleum Corporation (NNPC) said on Monday the condition given by Afreximbank for $1 billion loan will ensure the Port Harcourt refinery remains operational for another 15 years.
Afreximbank is expected to borrow the Nigerian government bulk of the funds required to finance the repair works on the country’s largest refinery.
The country had disclosed that $1.5 billion will be expended on the rehabilitation of the refinery.
The disclosure had led to criticism from Nigerians, including oil experts who believe the refinery be sold without the country spending a dime on the repair, leaving the buyer to bear the burden.
The criticism was due to the fear that funds will be misused or embezzled by the government, but the NNPC Group Managing Director, Mele Kyari, said in a statement that Afreximbaank would monitor the rehabilitation.
He said the creditor insisted the loan, which would come in two tranches of $500 million, be repaid from the operations of the refinery.
Kyari, who explained why the repair had recorded setback in the past and said the financing arrangements rule out any new setback.
The NNPC chief said: “This process started 10 years ago and a number of mistakes happened leading to the enormous delay we have seen in this process because there were a lot of interferences in the past but these are gone.
“Initially, we thought that the best way to go was to go to the original builder but it wasn’t the right strategy.
“Another way of making this project work was the introduction of borrowing for the repair work because when you borrow, the lenders will put conditions and one of the conditions is that it should be maintained under ‘own and earn’.
“This means that the NNPC will not operate this plant as a basic requirement of the financing institution. The financing partner will ensure that the contractor will work efficiently.
“Importantly is that the contractor O&M gave a guarantee that the facility will operate for the duration of the loan and the fact the project will be done under a financing structure supported by Afreximbank.
“The bank has promised a $500 million loan in the first instance and an additional $500 million making it $1 billion and the condition is for the loans to be repaid from the operations and proceeds of this plant.”
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