NNPC explains its controversial $1.56 billion syndicated loan.
The Nigerian National Petroleum Corporation, NNPC, on Monday finally gave an explanation for its controversial $1.56 billion syndicated loan.
The five-year amortizing loan deal is reportedly syndicated by Standard Chartered Bank along with PNB Paribas and Standard Bank U.K., using about 15,000 barrels of Nigeria’s crude oil per day as collateral.
Since news about the controversial foreign loan filtered out through a dispatch by Reuters news agency last month, the NNPC management has kept sealed lips on the details, with some officials claiming it would be used to settle some accumulated foreign debts as a result of imported petroleum products, to “salvage Nigeria’s credit rating.”
For weeks, neither the Minister of Petroleum Resources, Diezani Alison-Madueke, who is also the Chairman of the NNPC Board, nor its Group Managing Director, Andrew Yakubu, offered any details about the loan.
In a presentation that Mr. Yakubu made to a House of Representatives Joint in Abuja, the NNPC boss said that contrary to speculations, the corporation was not planning to obtain any loan. Rather, he said, the $1.56 billion deal is “a forward sales arrangement to offset accumulated legacy liabilities incurred as a result of crude oil and product losses, pipeline vandalism and demurrage on products in the strategic reserve stock.”
Mr. Yakubu said that the NNPC import invoices become due for payment 45 days after the products have been delivered to the country. He said they are allowed to accumulate to over 360 days in recent times due to obvious cash flow constraints.
“The non-reimbursement by Federal Government of the petroleum products price differentials to NNPC has gradually led to accumulated and unpaid petroleum products invoices of about $3.5billion,” the GMD said.
According to Mr. Yakubu, the non-payment of monies due to importers of petroleum products has accumulated for over three years, thus exposing domestic banks to about $1.5billion liabilities; an exposure, he said, could lead to another banking crisis in the country.
He said the NNPC Board of Directors approved the forward sale structure as an alternative for petroleum products imports.
Reuters had revealed in its report that it had uncovered a similar deal last year by the Ministry of Petroleum Resources, which showed that the NNPC was indebted to the world’s leading Swiss commodities trading and petroleum products marketing multinationals, like Glencore and Mercuria, by about $3.5 billion in unsettled claims for petroleum products import to Nigeria.