Nigeria: Afreximbank, UBA announce $2.25b disbursement

African Export-Import Bank (Afreximbank) has effectively organized a syndicated crude oil prepayment facility of US$3.3 billion, sponsored by the Nigerian National Petroleum Company Limited (NNPCL). The initial disbursement of US$2.25 billion has already been executed, with a second tranche of US$1.05 billion anticipated for future disbursement.

This landmark financing is Nigeria’s largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023. Investors were keen to consider ticket sizes of US$250m and US$500m amidst current headwinds and year-end pressures in the loan markets. The five-year facility carries a margin of 6.0 per cent per annum above the three-month secured overnight financing rate (SOFR).

The transaction is structured with an integrated price balance mechanism. Under this arrangement, 90% of any surplus cash generated from the sale of the committed barrels, after covering debt service, will be released. The remaining 10% will be allocated to prepay the facility, thereby shortening its final maturity. This strategic approach aims to enhance cash flow by freeing up resources from future pledged cargoes for utilization by Nigeria.

The initial participating lenders are Afreximbank, Africa’s multilateral trade finance institution, Gunvor International BV, a Geneva-based multinational energy and commodities trading company and Sahara Energy Resources Limited, an African-owned, leading international energy and infrastructure conglomerate.

In expressing appreciation for the successful financial close, Afreximbank President and Chairman of the Board of Directors, Prof. Benedict Oramah, highlighted that “this facility further demonstrates the Bank’s commitment to supporting African economies when such assistance is most needed.

Afreximbank stands by its member countries in good and in difficult times. The disbursement of the initial US$ 2.25b under the facility will support Nigeria’s long-term economic stability, ease access to import financing for raw materials and essential goods, support Industrialization and trade development efforts. We are pleased that despite the typical year-end encumbrances, our partners and investors rallied and raised the funds required in record time. We thank them for their support.”

The NNPCL Group Chief Executive Officer, Mr. Mele Kolo Kyari, commented on this landmark transaction, noting that “the proceeds of the facility have been made available to the Federal Republic of Nigeria as one of several efforts towards improving macro-economic stability. The participation of global, international and regional syndication firms is a further testament to the lending market’s appetite for financing sponsored by NNPCL and signifies solid market confidence in Nigeria.”

The Group Managing Director/CEO, United Bank for Africa (UBA), Oliver Alawuba said that “UBA is delighted to participate in this transaction which accentuates its commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria.”

source: guardian.ng