NNPC Seeks $2 Billion Loan Amid Rising Debts and Oil Production Struggles

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State-Owned Oil Firm Faces Financial Pressure and Production Challenges

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BRUSSELS/LONDON, July 8- The Nigerian National Petroleum Corporation (NNPC) is seeking another oil-backed loan to enhance its finances and invest in its operations, according to its chief executive. The state-owned oil company, crucial to Nigeria’s economy, aims to raise at least $2 billion, sources familiar with the matter said.

In the past four months, NNPC’s debts to gasoline suppliers have doubled, reaching $6 billion. The company’s financial woes are exacerbated by pipeline theft and years of underinvestment, which have hindered oil production. Additionally, the high cost of gasoline subsidies has further strained cash reserves.

President Bola Tinubu has been pushing for reforms in Africa’s largest oil exporter, including eliminating fuel subsidies and allowing the naira to trade closer to market levels. However, these changes risk pushing the population to a cost-of-living breaking point.

NNPC chief Mele Kyari confirmed that the company is seeking a loan backed by 30,000-35,000 barrels per day of crude production but declined to specify the amount. He emphasized that the funds would support all of NNPC’s business activities, including production growth.

“We have no problem covering our gasoline payments. This is just money for normal business and not a desperate act,” Kyari told Reuters. He added that the deal would be a syndication with regular partners and expected to conclude within the next two months.

NNPC already has a $3.3 billion oil-backed loan through Afreximbank. However, sources indicated that the company’s lack of cash has worsened due to rising fuel subsidy costs, and the new loan would help cover these expenses. It remains unclear which lender would arrange the loan, as Afreximbank may be unable to extend its exposure to Nigeria.

Some oil trading houses have ceased participating in NNPC’s gasoline tenders because overdue bills have exceeded their allowable exposure to Nigeria. After taking office last year, Tinubu announced the removal of fuel subsidies, allowing pump prices to triple. Critics argue that subsidies primarily benefit urban car owners and have drained Nigeria’s finances for years.

Despite the removal of subsidies, NNPC capped average fuel prices at just above 600 naira per liter last year. As the naira fell and global oil prices rose, the cap has become increasingly untenable. Fuel queues formed in Lagos last week as Abuja petrol marketers stopped selling, with sources indicating that the ex-depot price in Lagos is above 700 naira per liter.

The 650,000 barrel per day Dangote refinery near Lagos expects to begin producing gasoline soon. However, the refinery’s loans and crude oil feedstock costs are in U.S. dollars, making it reluctant to sell at a loss within Nigeria or wait months for NNPC payments.

The government faces mounting pressure to increase pump prices but is cautious, mindful of recent deadly riots in Kenya over tax hikes.

David Okafor
David Okaforhttp://naija247news.com
David Okafor Foreign Affairs Editor, Naija247news Media Group David Okafor is the Foreign Affairs Editor at Naija247news Media Group, with over five years of experience in international journalism. He excels in delivering insightful and impactful coverage of global politics and economic trends. Holding a degree in International Relations, David is known for his investigative skills and editorial leadership. His work ensures Naija247news provides accurate and comprehensive analysis of world events, earning him respect in the media industry.

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