The Nigerian National Petroleum Company Limited stated its plan to use the $3.3 billion loan received from the African Export-Import Bank to cover operating demands and pay upfront tax and royalties owed to Nigeria on Sunday.
The Times reported that this was revealed in a paper titled ‘Frequently Asked Questions – Project Gazelle,’ provided by the Chief Corporate Communications Officer, Olufemi Soneye.
According to the NNPCL, the loan would also be used to help stabilize the foreign exchange market by bolstering the foreign reserves. It added that forward contracts like this provide a more rapid solution to the federal government’s foreign exchange liquidity needs.
It said, “This project provides immediate USD financing for NNPC Limited’s operational needs, including paying its tax and royalty obligations to Nigeria upfront.
It added that by using the upfront funding, Nigeria can maintain the stability of its currency, the Naira, and increase its foreign exchange reserves.
Furthermore, the NNPCL indicated that it utilized a benchmark oil price of $65 per barrel to repay the loan, citing the need to protect the repayment plan from the fluctuations in the international oil market.
It added, “Project Gazelle calculates the allocated crude to be produced and sold in the future using a conservative crude price of $65 per barrel. This provides a buffer against potential price volatility.”
However, it emphasized that higher oil prices result in speedier loan repayment, and vice versa.
Also, the oil company reported that it had set aside 90,000 barrels of crude oil for the payment process to ensure sufficient cash flow.
In August, the NNPCL and the African Export-Import Bank announced a $3 billion emergency crude repayment loan as part of their attempts to strengthen the naira.
The federal government clarified that the loan will be returned with a portion of the earnings from future crude oil production.
Multiple reports verified in December that the federal government had received the first tranche of the $2.5 billion loan, which was arranged by local bank UBA.
The major goal of the loan is to absorb the shocks caused by President Tinubu’s reforms, which include the withdrawal of fuel subsidies and the unification of the foreign exchange market.
