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Sunday, November 27, 2022

NNPC in $1.5 billion, Prepayment deal with Vitol, Matrix

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The Nigerian National Petroleum Corporation (NNPC) has signed a $1.5 billion prepayment deal led by Standard Chartered and backed by oil traders Vitol Group and Matrix Energy, the New York Times reported.

It is the first such agreement since the coronavirus pandemic.

The deal provides OPEC-member Nigeria with much-needed cash after its finances were hit by the oil price crash in April as COVID-19 lockdowns erased nearly one third of global oil demand.

The financing package called Project Eagle was also backed by African Export Import Bank (Afrexim) and United Bank for Africa, according to the report.

Vitol and Matrix will each get 15,000 barrels per day (bpd) of crude as repayment over five years, starting in August. Nigeria’s crude production is nearly 2 million bpd.

Prepayments with traders are widely used in commodity finance as banks consider them to be one of the more secure forms of lending in countries viewed as risky.

For trading firms such as Vitol, these loans are ideal for securing long-term supplies and boosting razor-thin margins.

NNPC has been trying to raise cash through prepayments with traders for years.

NNPC is expected to use a large portion of the money to pay taxes owed by its subsidiary NPDC, according to the report.

The remainder will go towards operational expenses and capital expenditure. Some of the money from the pre-payment could also fund turn around maintenance (TAM) of the Port Harcourt refinery.

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