VENTURES AFRICA – Nigerian state oil firm NNPC has been loaned $1.5 billion in order to pay off its debts to international fuel traders, easing the burden on commodity traders and reducing the possibility of Nigeria defaulting on loans.
The deal is crucial to big commodity traders, who were facing the possibility of multi-million dollar write-offs. NNPC owes major trading houses such as Glencore and Mercuria approximately $3.5 billion in unpaid fuel supply bills.
Reuters reports that Nigeria would have seen restrictions in its future borrowing capacity had it defaulted, threatening their recently-upgraded status with credit agencies Fitch and Standard & Poors.
The loan is syndicated, provided by a handful of Nigerian and international banks, and was brokered by Standard Chartered at the end of last year. It will be required to be repaid over a five and a half year period. Collateral of 15,000 oil barrels per day has been provided by NNPC.
NNPC is heavily in debt after decades of mismanagement and corruption. 35 firms are still owed money for fuel, and trading companies have been fighting to regain their money, with some having as a result stopped supplying fuel to Nigeria.
Glencore is owed $138 million, Vitol $198 million and Trafigura $53 million. These figures may not tell the whole story, however, as debts to individual trading companies may be much higher as a result of exposure via partner firms and subsidiaries. Bermuda corporate registration documents have showed that Calson, who NNPC owes a total of $115.11 million, was using Vitol’s Geneva address, while Napoil, owed a total of $75.6 million, is in partnership with Trafigura.
Nigeria, a member of OPEC, is among the top ten exporters of crude oil and Africa’s second largest economy. But the country has insufficient refining capacity in order to meet domestic fuel needs, and is thus heavily reliant on imports. This requires it to pay expensive subsidies in order to keep retail prices down.
These subsidies came under threat from President Goodluck Jonathan a year ago, but he was forced to back down amid protests over the possibility of a rise in fuel costs.