The United Bank for Africa Plc (UBA) has acted as the lead arranger of a consortium in a $1.5Billion Pre-Export Finance Facility for the Nigerian National Petroleum Corporation (NNPC) and its upstream subsidiary, the Nigerian Petroleum Development Company (NPDC).
According to an official statement from the tier-one bank made available to Emerald News, UBA provided $200million in the arrangement to provide financing for Nigeria’s petroleum industry post-pandemic growth.
Speaking on this most recent support for the Nigeria’s petroleum industry, UBA Group Chairman, Tony O. Elumelu stated.
‘This has been one of the most economically challenging years that Nigeria has witnessed. With the sharp drop in the price of oil and the ensuing hardship that followed the onset of the Covid-19 pandemic, the private sector must come together and contribute meaningfully to the economy.
“This facility is clear evidence of this – UBA is providing investment that will significantly improve Nigeria’s production capacity and in doing so also demonstrating the strength, depth, and sophistication of our commercial banking capability. I believe that together, working with governments, we can create more jobs and more wealth for people, not only in Nigeria, but across Africa’.
The consortium has other Nigerian commercial and international banks and seeks to provide timely financing to support investment growth and liquidity requirements and boost oil production and government revenue in the country.
Why this matters
With this facility in place, NNPC now has the much needed capital to boost its oil production capacity, and boost the foreign exchange earnings, given the strategic importance of oil to Nigeria’s revenue.
Other participants in the NNPC deal include Standard Chartered Bank, Afrexim Bank, Union Bank and two oil trading companies, Vitol and Matrix.
How the facility will work
The $1.5 billion facility has been structured in two tranches.
UBA’s position as Lead Arranger recognises the Group’s strength in structuring and deploying financing to the oil and gas sector, and the depth and liquidity of the Group’s balance sheet.
The first tranche of $1 billion, will be provided in dollars, with UBA acting as the Facility Agent Bank; while the second tranche of $500 million, will be provided in local currency.
Both facilities are to be repaid from an allocation of 30,000 barrels per day of NPDC’s crude oil, the first over a period of five years, and the second over seven years.
What you should know
UBA’s position as lead arranger is indicative of the strength of its balance sheets and strong track record. The bank has facilitated oil prepayment deals with the NNPC in the past, including its 2013 $100 million participation in the PXF Funding Limited transaction, and a further $60 million in the 2015 Phoenix Export Funding Limited transaction.
In Senegal, UBA was also responsible for the EUR 240 million revolving crude oil financing facility for the Société Africaine de Raffinage and in Congo Brazzaville co-funded the $250m crude oil prepayment facility for Orion Oil Limited.