Former Vice President Atiku Abubakar has raised concerns about the lack of transparency surrounding the $3.3 billion emergency loan secured by the Nigerian National Petroleum Company (NNPC) last year from Afreximbank.
In a post titled “Tinubu’s administration owes Nigerians an explanation for the NNPC $3.3bn emergency loan,” shared on X Thursday, Abubakar called on President Bola Tinubu’s administration to clarify the framework and details of the loan, expressing curiosity over the government’s silence on the matter.
The emergency loan, secured on August 16, 2023, was intended to boost the performance of the naira in the foreign exchange market, as stated by the NNPC. The deal is supposed to be a crude-for-cash loan arranged by the African Export-Import Bank.
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However, the former presidential candidate of the Peoples Democratic Party (PDP) pointed out that the Nigerian government has remained tight-lipped about the deal, with information disseminated solely through unofficial sources from the NNPC.
One notable aspect of the transaction is the involvement of a Special Purpose Vehicle (SPV) named Project Gazelle Funding Limited, incorporated in the Bahamas. Abubakar questioned the choice of registering the company in the Bahamas, given the country’s recent association with financial scandals like the Paradise Papers.
“What is even more confounding about this deal is why the Federal Government would register a company in the Bahamas, knowing full well the recent scandal of the Paradise Papers that involved that country,” he said.
According to available information, the SPV is the borrower, with NNPC as the sponsor, agreeing to repay the loan through crude oil at an interest rate slightly exceeding 12 percent, he further remarked.
Abubakar expressed concern about the details of the deal, especially given Nigeria’s daily crude production of 1.38 million barrels and the commitment to supply 90,000 barrels daily from 2024 until reaching 164.25 million barrels for loan repayment.
The former vice president highlighted a significant discrepancy in the repayment amount, estimating a staggering $12 billion based on Nigeria’s crude benchmark price of $77.96 per barrel in 2024.
“Now, this is where the details get disturbing because Nigeria’s benchmark for the sale of crude per barrel in 2024 is $77.96. A simple multiplication of that figure by 164.25 will give us a whopping $12bn,” he said.
“It is inconceivable that the Federal Government will lead the country to take a loan of $3.3b with an interest rate that is not more than 12 percent, but with estimated repayment amounting to $12bn.
“That is a humongous differential of about $7b between what is in the details of the deal on paper and what indeed is the reality.”
Abubakar emphasized the need for the federal government to address the unclear aspects of the deal, calling it into question and urging transparency.
“There are questions to be answered on the integrity of this deal, and we earnestly request the Federal Government to talk directly on these cloudy details behind the deal,” he said.
In his statement, the PDP chieftain demanded, “on behalf of the ordinary people of Nigeria, that the Federal Government provides answers to the following questions.”
- Has the Federal Government accessed the loan?
- Is the loan in the government’s borrowing plan as approved by the National Assembly?
- Who are the parties to the loan, and what specific roles are they expected to play?
- What are the conditions of the loan, including tenor, repayment terms, the collateral, and the interest rate?
- And, lastly, why register an SPV in the Bahamas knowing the recent scandal of the country’s notoriety for warehousing unclean assets?
Atiku is not the only Nigerian who has voiced concerns over the loan. Several analysts have said that there is more to the deal than meets the eye, and the federal government owes Nigerians some explanations. Kelvin Emmanuel, CEO of Dairy Hills, an energy expert and financial analyst, had earlier expressed concerns about the legality and implications of the loan.
Emmanuel meticulously examined the loan agreement, identifying inconsistencies that he deemed could establish a perilous precedent for the economy. He drew attention to elements like the daily allotment of crude, the overall repayment duration, the configuration of the Special Purpose Vehicle (SPV), and the management of price differentials between forward sales and spot prices.
In his analysis, Emmanuel postulated that the transaction structure might be forming a pseudo-excess crude account, potentially depriving Nigeria of the advantages associated with fluctuations in the global oil markets. He expressed disapproval of loans secured by resources and drew a parallel between the forward sales agreement and the financialization of future oil and gas assets.
“I am NOT a fan of resource-backed loans, and this forward sales agreement that is akin to financialization of future oil and gas assets is an anomaly in statecraft that the National Assembly should fight with all rigor,” Emmanuel remarked. “There is no genius in it; it is a lazy approach to getting FX dollars to improve your balance of payment position.”
As the call for transparency intensifies, the public awaits a response from the authorities to shed light on the intricacies of the NNPC’s $3.3 billion emergency loan. In December, the NNPC reportedly received $2.5 billion tranche of the loan. The company, last week, unveiled its strategy for deploying the loan.