- After years of trying to raise cash through repayments with traders, Nigerian National Petroleum Corporation (NNPC) on behalf of the federal government of Nigeria has finally signed a $1.5 billion prepayment deal
- ‘Project Eagle,’ was signed with Standard Chartered and backed by oil traders Vitol Group and Matrix Energy, The African Export-Import Bank (Afrexim) and United Bank for Africa (UBA).
After years of trying to raise cash through prepayments with traders, Nigerian National Petroleum Corporation (NNPC) on behalf of the federal government of Nigeria has finally signed a $1.5 billion prepayment deal for the supply of prepaid barrels of oil. According to media sources, the first such agreement since the COVID-19 pandemic, called ‘Project Eagle,’ was signed with Standard Chartered and backed by oil traders Vitol Group and Matrix Energy, The African Export-Import Bank (Afrexim) and United Bank for Africa (UBA).
The Agreement makes provision for Vitol and Matrix to get 15,000 barrels each per day (bpd) of crude as repayment over five years, starting in August. Nigeria’s crude production is reported to be nearly two million bpd.
Prepayment deals normally take place When petro-states are cash-strapped. The current deal would provide Nigeria with much-needed cash after its finances were hit by the oil price crash in April while COVID-19 lockdowns erased nearly one-third of global oil demand. Observers say that the said deal would provide Nigeria with upfront cash and guaranteed revenue as it expands its budget though the deal may weaken longer-term revenues, in case of price increases in the future.
The traders at the same time, stand to benefit with a steady and assured source of supply at a discount for an extended period of time that can be used for resale in the global market and also enable them to establish long-term relationships with producers. Market analysts point out that traders in a pre-payment deal enjoy the advantages of a close relationship with a major oil exporter, giving them access to time-sensitive data that will boost their market intelligence and information flow.
NNPC proposes to use a large portion of the money to pay taxes owed by its subsidiary Nigerian Petroleum Development Company (NPDC) and for its operational expenses and capital expenditure. Some observers have pointed out that the fund could be utilised for the up-gradation of the Port Harcourt refinery.
