The Nigerian National Petroleum Company Limited (NNPCL), which obtained a $3.3 billion financing arrangement from the African Export-Import Bank last year, has disclosed its intentions to prepay future royalties and taxes to the Federal Government. The corporation intends to use the money to improve financial stability and stabilize the value of the Nigerian Naira.
Read also; Nigeria to pay 11.85% on Afrexim-NNPC $3.3bn loan, pledges 164m barrels as security
In a document titled ‘Frequently Asked Questions – Project Gazelle,’ released by the Chief Corporate Communications Officer, Olufemi Soneye, the NNPC highlighted the key aspects of the financing agreement. The $3.3 billion crude oil pre-payment loan is designed to prepay future royalties and taxes to the Federal Government.
The company adopted a conservative crude oil price benchmark of $65 per barrel for the $3.3 billion crude-for-cash loan to minimize the risk of default and ensure financial stability. This pricing strategy provides a safety margin for potential fluctuations in crude oil prices, with the current global benchmark, Brent, standing at around $78 per barrel.
The document clarified that NNPC Limited has reserved up to 90,000 barrels of crude for Project Gazelle, ensuring sufficient cash flow for repayment and other financial obligations. The quantity of crude earmarked for the project is strategically sized to guarantee repayment and meet other cash flow obligations, considering the expected future price of crude oil globally.
Repayments for the facility are planned and tied to future oil sales, and conservative pricing in oil sales contracts aims to mitigate risks associated with oil price volatility. The NNPC expressed confidence in its ability to manage the financial arrangement effectively and meet its obligations.
Oreoluwa is an accountant and a brand writer with a flair for journalism.
