Nigeria: UBA and Afreximbank announce $2.25 billion initial crude oil disbursement

United Bank for Africa (UBA) and the African Export-Import Bank (Afreximbank) have revealed an initial disbursement of $2.25 billion under an advance payment facility for crude oil, worth a total of $3.3 billion, sponsored by the Nigerian National Petroleum Company Limited (NNPCL).,A second tranche of $1.05 million is expected to be granted at a later date.

United Bank for Africa (UBA) acted as local arranger and onshore account bank for the transaction, which is expected to alleviate currency illiquidity and stabilize the Nigerian foreign exchange market. The transaction is seen as another important step in unlocking Nigeria's economic potential.

This landmark financing is Nigeria's largest crude oil prepayment facility and one of the largest syndicated loans raised in Africa in 2023. The 5-year facility carries a margin of 6.0% p.a. over the 3-month Secured Overnight Rate (SOFR). The structure of the transaction incorporates a price-balancing mechanism whereby 90% of all excess cash flow from the sale of committed barrels (after debt servicing) will be returned to the borrower, while the remaining 10% will be used to prepay the facility, effectively shortening the final maturity of the facility and freeing up cash flow from future cargoes committed for use in Nigeria.

The first participating lenders are Afreximbank, Africa's multilateral trade finance institution; Gunvor International BV, a Geneva-based multinational energy and commodities trading company; and Sahara Energy Resources Limited, a leading African-owned international energy and infrastructure conglomerate.

Afreximbank's extensive technical and structuring experience in setting up similar complex oil and gas financing facilities in Angola, Republic of Congo, South Sudan, Chad, Egypt and Ivory Coast. Ghana, etc. contributed to the successful closure of the facility, despite a very difficult market environment. The Bank acted as sole mandated lead arranger, technical and modeling bank, bookrunner, facility agent, offshore account bank, intercreditor agent and collateral agent.

Welcoming the successful financial close, Afreximbank President and Chairman of the Board, Professor Benedict Oramah, explained that "this facility demonstrates once again the Bank's commitment to supporting African economies, at a time when such assistance is most needed. Afreximbank stands by its member countries in good times and bad. The disbursement of the initial $2.25 billion under the facility will underpin Nigeria's long-term economic stability, facilitate access to import financing for raw materials and essential goods, and support industrialization and trade development efforts. We are pleased that, despite the typical year-end pressures, our partners and investors have committed the necessary funds in record time. We thank them for their support.

NNPCL Group CEO, Mr. Mele Kolo Kyari, commented on this landmark transaction, noting that "the proceeds of the facility have been made available to the Federal Republic of Nigeria as part of one of the strategies to improve macro-economic stability. The participation of global, international and regional syndication companies is further evidence of the lending market's appetite for NNPCL-sponsored financing and demonstrates strong market confidence in Nigeria.

United Bank for Africa (UBA) Group Managing Director/CEO Oliver Alawuba said, "UBA is delighted to participate in this transaction, which further demonstrates UBA's commitment to providing the interventions and solutions needed to solve economic challenges in Nigeria and across Africa. . UBA has a track record of structuring and participating in major resource-based transactions, leveraging its global network and dollar balance sheet. Similar transactions include an agreement with the DRC, an agreement with Kenya, an agreement between the RAS of Senegal and Orion with Afreximbank.