The Nigerian National Petroleum Company (NNPC) Limited started its week with the securing of a 5 billion dollars corporate finance commitment from the African Export Import Bank (Afreximbank) to fund major investments in Nigeria’s upstream sector.
For NNPC, securing the facility is a milestone achievement, especially in its bid to scale up investments in the oil and gas industry.
The loan will provide a veritable platform for the NNPC Limited to successfully implement the Petroleum Industry Act (PIA) in the industry.
The new legislation has provided business opportunities that will enable the NNPC earn more revenue for the country and attract Foreign Direct Investment (FDI) into the Nigerian energy sector.
The loan will therefore serve as a facilitator for the upcoming projects.
Additionally, the PIA has raised stakeholders’ expectations on the company, even as it has given it a wide room to stimulate investments in the oil and gas industry.
Under the NNPC Ltd funding strategy for selected upstream investments, the Company would be raising between $3.5bn and $5bn as corporate finance to fund major upstream investments.
A major outcome of this partnership with Afreximbank is to support upstream capacity to boost energy supply.
There will be acquisition of interests in quality upstream oil and gas producing assets, just as it is projected that this will help facilitate energy supply and transition.
The NNPC by this funding prospect will take over ownership from non-investing partner through acquisition of pre-emption rights in the Sample Joint Venture.
Furthermore, the NNPC’s strategy will also enable the company invest in assets that will address and reduce the issues of integrity, bottlenecking and growth challenges; it will also support the promotion of rig-less activities and drilling campaigns in the oil industry.
On funding repayment, it is expected that this will be done within a four to eight years’ period with the objective of ensuring major fiscal obligations and appropriate discharge of operating expenses.
Meanwhile, a fallout of the collaboration will be to explore the innovative idea of establishing a Pan-African Energy Transition Bank; NNPC Limited and Afreximbank have agreed to work out the modalities of achieving this objective.
The importance of an African Energy bank cannot be over stated as there is a need to cultivate a pool of investors who understand and appreciate the importance of oil and gas to the economic development of African nations.
Whilst foreign capital is desirable, it has hitherto not been reliable in funding oil and gas investment in Africa.
The establishment of institutions as the African Energy Bank will therefore enable local oil and gas companies boost new and existing projects developments, ensure reliable financing channels for oil and gas and position the continent as a net exporter of hydrocarbons, while creating capital opportunities for renewable energy projects.
Afreximbank is a Pan-African multilateral trade finance institution created in 1993 under the auspices of the African Development Bank with the mandate to finance and promote intra- and extra-African trade using three broad services.
The services are credit (trade finance and project finance), risk bearing (guarantees and credit insurance) and trade information and advisory services.
Afreximbank has 50 African member-countries; as of June 2020, the bank had four regional locations and is in the final stages of establishing a fifth regional office for Central Africa.
The Chief Executive Officer of the NNPC Limited, Malam Mele Kyari, and the Chairman of the Board of Directors and President of Afreximbank, Prof. Benedict Oramah, sealed the epoch making agreement on behalf of their respective institutions in Cairo, Egypt.
Kyari was accompanied on the trip by the Chief Financial Officer, Umar Ajiya; the Group Executive Director, Upstream, Engr. Adokiye Tombomieye; the Group General Manager, NAPIMS, Mr Bala Wunti; the Managing Director, NNPC Trading, Mr Lawal Sade, and others.
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