United Bank for Africa Plc (UBA) and the African Export-Import Bank (Afreximbank) have announced an initial disbursement of US$2.25 billion under a syndicated crude oil prepayment facility sponsored by the Nigerian National Petroleum Company Limited (NNPCL).
A second tranche of US$1.05 million is expected to be disbursed subsequently.
The total cost of the facility is US$3.3 billion
This is reported to be the largest syndicated loan ever raised by Nigeria in the international market and one of the largest syndicated transactions in Africa in recent years.
According to a statement issued on Sunday, the facility would support Nigeria’s macroeconomic stability and long-term economic growth, facilitating access to raw materials and trade development.
Commenting on the development, Afreximbank president and Chairman, Benedict Oramah, said the disbursement of the initial US$2.25 billion under the facility would support Nigeria’s long-term economic stability, ease access to import financing for raw materials and essential goods, support industrialisation and trade development efforts.
Oramah indicated that this facility further demonstrated the bank’s commitment to supporting African economies, when such assistance was most needed.
“Afreximbank stands by its member countries in good and in difficult times. We are pleased that despite the typical year-end pressures, our partners and investors committed the funds required in record time,” Oramah stated.
The transaction structure had an embedded price balance mechanism where 90 percent of all excess cash from the sale of the committed barrels (after debt service) would be released to the borrower.
Also, the balance of 10 percent would be used to prepay the facility, effectively shortening the final maturity of the facility and freeing cashflow from future pledged cargoes for use by Nigeria.
Also in his reaction, UBA group Managing Director/ Chief Executive Officer, Oliver Alawuba said: ‘UBA is delighted to participate in this transaction, which demonstrates once again UBA’s commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria and across Africa.
“UBA has a track record of structuring and participating in significant resource-based transactions, leveraging its global network and dollar balance sheet. “Similar transactions include DRC deal, Kenyan deal, Senegal SAR Orion deal with Afreximbank.”
Meanwhile, Menle Kolo Kyari, group Chief Executive Officer, NNPCL, stated that the proceeds of the facility had been made available to the Federal Government (FG) as one of the strategies to improving macro-economic stability.
“The participation of global, international and regional syndication firms is a further testament to the lending market’s appetite for financing sponsored by NNPCL and signifies solid market confidence in Nigeria,” Kyari stated.
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