The Nigerian National Petroleum Company Limited (NNPCL) says it will prepay future royalties and taxes to the Federal Government from the $3.3 billion financing deal it got from African Export-Import Bank (Afreximbank) last year.
NNPCL disclosed this in a document titled, ‘Frequently Asked Questions – Project Gazelle’, released by its Chief Corporate Communications Officer, Olufemi Soneye, on Sunday night.
On August 17, 2023 the NNPCL announced that it had secured a $3.3 billion emergency crude oil repayment loan from the African Export-Import Bank.
It explained that the loan would be used by the oil company to support the Federal Government in stabilising Nigeria’s exchange rate.
Providing more details about the deal in the document, the oil company said, “Everything you need to know about the NNPC Limited’s $3.3 billion loan, also known as Project Gazelle.
“There has been a lot of interest from the public and stakeholders in recent weeks regarding the $3.3 billion crude oil pre-payment loan, also known as Project Gazelle. This is a financing agreement secured by NNPC Limited to prepay future royalties and taxes to the Federal Government.”
The company also stated that it adopted a lower price benchmark for the $3.3 billion crude-for-cash loan to reduce the risk of default and ensure financial stability.
Giving details on the benchmark oil price, the company said the facility was using a conservative crude price of $65/barrel to calculate the allocated crude to be produced and sold in the future.
Brent, the global benchmark for crude, is currently at about $78/barrel.
Commenting on the benchmark oil price of $65/barrel for the $3.3 billion deal, the national oil firm said, “This provides a safety margin for price fluctuations in the future.
“NNPC Limited has reserved up to 90,000 barrels of crude for Project Gazelle, ensuring sufficient cash flow for repayment and other financial obligations.
“If oil prices rise, more money will come in from selling the 90,000 barrels, allowing for faster repayment. However, if oil prices fall, the repayment may be slower.
“The quantity of crude earmarked (90,000 barrels) is sized to ensure enough cash is available for the repayment of the facility when it is due. This also ensures that NNPC Limited can meet other cash flow obligations, considering the expected future price of crude oil globally.”
NNPCL also said repayments were strategically planned and tied to future oil sales, with conservative pricing in oil sales contracts mitigating the risks associated with oil price volatility.