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AfreximBank $5billion Boost To NNPC; Another Momentous To Kyari

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By Adewole Kehinde

Earlier this month, Malam Mele Kyari, said that the Petroleum Industry Act (PIA) has provided the organization with the opportunity to shed some of its toxic liabilities.

Kyari said the new legislation had raised shareholders’ expectations on the company as well as given NNPC a wide room to make progress.

The NNPC boss also charged staff of the organization to ensure that the company becomes a commercially viable entity and a multi-billion-dollar entity that would continuously deliver value to its shareholders.

It was not surprising when on Thursday; the Nigerian National Petroleum Company Limited announced that it is working with the African Export-Import Bank (AfreximBank) to raise the sum of $5billion to boost its upstream capacity and its energy transition business.

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I was so delighted when I saw on the Twitter handle of the GMD/CEO of NNPC Limited that, “Afreximbank working with NNPC Ltd to raise $5 billion financing to support our upstream Businesses and facilitate energy supply and transition. Opening the gate for many more opportunities of collaboration with Afreximbank.”

The NNPC and Afreximbank team agreed during the meeting to intensify efforts at deepening investment in Nigeria’s oil sector and strengthen the business collaboration between the two institutions.

Following the commencement of the Petroleum Industry Act, the agreement marks a milestone achievement in the quest for the corporation to scale up 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.

The move is a major milestone achievement in the quest for the corporation to scale up investments in the oil and gas industry following the commencement of the implementation of the Petroleum Industry Act.

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The PIA was signed into law by President Muhammadu Buhari on 16th August, 2021.

Following the assent of the President, the NNPC Ltd was incorporated by the Corporate Affairs Commission on September 22 last year after it received an application for its registration from the Federal Government.

The new legislation has provided business opportunities that will enable the NNPC earn more revenue for the country and attract foreign direct investment into the Nigerian energy sector

The PIA has also raised stakeholders’ expectations on the company, even as it has given it a wide room to stimulate investments in the oil and gas industry.

A friend asked me what the funding was about. My response was that the funding would be used to finance part of the NNPC’s investment including the acquisition of interest in quality upstream oil and gas producing assets.

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The NNPC’s $5bn corporate finance commitment from Afreximbank is a dividend of the Petroleum Industry Act and the incorporation of the NNPC as a limited liability company no doubt.

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.

To achieve this objective, the NNPC plans to take over ownership from non-investing partners through acquisition of pre-emption rights in the sample Joint Venture.

The NNPC’s strategy would also see the company investing in assets to address integrity, bottlenecking and growth issues including rig-less activities, and drilling campaigns in the oil industry.

The company’s preference is to source lenders that can provide this funding in a ratio based on the capacity of each of the lenders.

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The funding would also be used to finance part of the NNPC’s investment including acquisition of interest in quality upstream oil and gas producing assets.

The acquisition is an integral part of the NNPC’s corporate strategy to rebalance its portfolio by divesting from some toxic assets to acquire choice strategic assets that will help support its long term strategic objectives.

According to my findings, the repayment of the funding is expected to be done through a Forward Sale Arrangement whereby the funds provided will constitute the payment purchase of 90-120kpd of crude to be delivered to the lender over a period.

The repayment of the fund is being projected to be made within a four to eight-year period with an objective to ensure major fiscal obligations and operating expenses are discharged appropriately.

The meeting between the NNPC and Afreximbank team agreed to intensify efforts at deepening investment in Nigeria’s oil sector.

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Also, the NNPC and the Afreximbank agreed to, among other things; deepen the business collaboration between the two institutions.

The bank agreed to enter into a finance advisory and fundraising role to raise $5bn towards the “acquire, invest and operate energy producing assets in Nigeria as part of NNPC’s growth strategy following its incorporation as a limited liability company.”

As part of the landmark transaction, Afreximbank will also underwrite $1bn as part of forward sales base trade finance transaction.

The NNPC and Afreximbank also explored the innovative idea of establishing a pan-African Energy Transition Bank and agreed to collaborate towards achieving the objective.

Since the inauguration of the NNPC Limited Board, Mele Kyari and his Management team has hit the ground running vis-à-vis the AfreximBank $5billion boost.

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Mallam Kyari was accompanied on the trip by the Chief Financial Officer, Umar Ajiya; the Group Executive Director , Upstream, Adokiye Tombomieye; the Group General Manager, NAPIMS, Bala Wunti; the Managing Director, NNPC Trading, Lawal Sade, and others.

There is no doubt that the $5billion would be judiciously used as we all know that transparency and accountability has been the cardinal pillars of Mallam Mele Kyari’s agenda.

Adewole Kehinde is the Publisher of Swift Reporters based in Abuja. He can be reached via 08166240846, 08123608662

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