ABUJA — THE Nigerian National Petroleum Corporation, NNPC, is borrowing from at least 10 banks and using revenue from oil production to help clear a long-overdue $3.5 billion debt owed to foreign fuel traders.
Fuel subsidy payments totalling N94 billion have been verified for 23 marketers and “will be paid in the next few days.”
The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, confirmed this, yesterday, in a statement issued by her Special Adviser, Mr. Paul C Nwabuikwu.
This came as the Senate denied, yesterday, that it approved the NNPC loan, saying it had nothing to do with it.
“We are committed to paying all companies who deserve to get subsidy payments just as we will not pay undeserving firms. That is the mandate we have from the President,” Dr. Okonjo-Iweala declared.
Minister of Finance, Dr Ngozi Okonjo-Iweala
Minister of Finance, Dr Ngozi Okonjo-Iweala
The minister refuted media reports which alleged that the Federal Ministry of Finance was blocking verified payments to marketers.
The ministry, according to her, made the N161.6 billion supplementary budget for subsidy payments which had been approved by the National Assembly available to the Central Bank of Nigeria since the 31st of last month.
Okonjo-Iweala disclosed that the payments were presently going through the CBN’s processes which include the conversion of the dollar equivalent from the Excess Crude Account and would be concluded soon.
The National Assembly had grudgingly on Thursday, December 13, 2012, approved a N161 billion supplementary budget requested by President Goodluck Jonathan to settle fuel subsidy payments for the remaining part of the year to ensure steady fuel supply during the yuletide.
NASS did okay it — Senate
Chairman, Senate Committee on Media, Information, Senator Enyinnaya Abaribe, noted that it never at any time authorised NNPC to borrow any money, adding: “Under the law, no government agency can borrow money without the approval of the National Assembly.
We have to know before it was done first; but then the question to ask under the circumstance is: what happened to the N161 billion supplementary appropriation approved by the National Assembly for government to take care of the shortfall in the fuel subsidy budget, particularly to ensure steady supply of petroleum product during the yuletide?”
Banks providing funds
According to a bank source close to the deal, the NNPC struck a deal led by Standard Chartered Bank at the end of last year to borrow $1.5 billion from a mixture of foreign and Nigerian banks over a period of five and a half years priced at 375 basis point over Libor.
The banking source told Reuters that the foreign banks providing funds include France’s BNP Paribas, Standard Chartered, Natixis, multilateral lender Afrexim Bank, a local unit of Standard Bank and Korea’s MMC, while the Nigerian banks were United Bank for Africa, Ecobank, FirstBank and Union Bank.
The top African oil producer’s NNPC owes major commodity trading houses, including Glencore and Mercuria, around $3.5 billion in unpaid fuel supply bills, according to a report last year commissioned by the Ministry of Petroleum Resources.
The last ditch deal is seen as crucial to easing the burden on big commodity traders facing the prospect of painful multi-million dollar write-offs on those bills and saving Nigeria from defaulting on the loans, which would have worried credit agencies that recently upgraded the country.
Loan used to avert downgrading
The $1.5 billion syndicated credit obtained by the management of the NNPC was purely a “commercial decision” taken by the corporation to pay off accumulated debts for petrol already supplied by foreign importers, and to save Nigeria’s credit rating in the international markets, a source at the corporation said yesterday.
According to the source, “the management of the NNPC took the last-minute decision to salvage our credit rating as the Ministry of Finance has not been forthcoming for months with payments to our major international suppliers like Glencore, Trafigura, Vitol and others who have been facing the painful prospect of writing off millions of dollars owed them as bad debts.
“If this had happened, our ability to access foreign loans as a country would have been impossible and, believe me, credit rating agencies, which upgraded us recently, would have downgraded or even blacklisted us as serial defaulters.
“It was our only option and it was purely a commercial decision and I don’t think we require the National Assembly’s approval to go ahead with it.”
It was purely a management decision to ensure steady supply of petrol and to save our face amongst our foreign partners,” the source, who asked not to be named in this report, said.
Explaining further, the source said the debt would be in NNPC’s books and not the Federal Government’s.
The NNPC over the years had been mismanaged leaving the corporation in huge debts. Reuters said it was struck towards the end of last year..
The loan, provided by several Nigerian and international banks, was brokered by Standard Chartered Bank.
The NNPC pledged 15, 000 barrels of crude per day as collateral with an agreement to pay the loan back in five and a half years.
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