First Bank, UBA, others to lend NNPC $1.5bn

First Bank, United Bank for Africa, UBA, and Ecobank Plc have been named as members of a 10- bank consortium preparing to extend a $1.5bn loan facility to the Nigerian National Petroleum Corporation, NNPC, to pay off international fuel traders for petroleum products supplied in recent years.
The loan deal is generating controversy with the National Assembly insisting that no such approval was given while labour unions have described it as fraudulent.
Sources close to the transaction said the NNPC struck a deal led by Standard Chartered Bank at the end of last year to borrow $1.5bn from a combination of foreign and Nigerian banks over a period of five-and-a-half years at an interest rate fixed at 375 basis points above the London Inter-Bank Offered Rate, Libor.
Reuters reported that the foreign banks providing funds include France’s BNP Paribas, Standard Chartered, Natixis, multilateral lender Afrexim Bank, Standard Bank Nigeria and Korea’s MMC, while the Nigerian banks include UBA, Ecobank, First Bank and Union Bank.
NNPC had pledged 15,000 barrels per day of its oil production as collateral when the loan negotiations began last year, the source said.
The NNPC owes major commodity trading houses, including Glencore, Trafigura and Mercuria, around $3.5bn in unpaid fuel supply bills, a report last year commissioned by the Ministry of Petroleum stated.
The deal, sources said, is to prevent Nigeria defaulting on the loans which is likely to affect the nation’s international credit ratings.
Reuters noted that the NNPC had already earned $404m from that committed oil since talks began, and it would add those funds to the $1.5bn borrowed to pay its debt to oil traders. But the Senate and House of Representatives as well as organised labour have questioned the propriety of the deal.
The lawmakers, who said they were unaware of the deal, said no such approval had been given though it emerged that President Goodluck Jonathan had endorsed it.
Chairman, Senate Committee on Information, Media and Public Affairs, Senator Enyinnaya Abaribe, while responding to media inquiry on the issue on Tuesday, had insisted that the constitution did not allow any government agency to borrow any money without the authorisation of the National Assembly.
He had said: “Under the law, no government agency can borrow money without the approval of the National Assembly.
“We have to know that if that was done first, but then the question to ask under the circumstance is: what happened to the N161bn supplementary appropriation that was approved by the National Assembly for government to take care of the shortfall in the fuel subsidy budget.
Chairman, Senate Committee on Petroleum (Downstream), Senator Magnus Abe, had also said there was no record to show that approval was given to the NNPC to borrow the money.
In its reaction on Wednesday, the Nigeria Labour Congress, NLC, accused the NNPC of perpetrating a “fraudulent” dependence on fuel importation and looting of the treasury, saying the loan the national oil company said it needed to pay debts had further exposed the fraud in the management of fuel subsidy.
The NLC, in a statement by its Deputy General Secretary, Chris Uyot, had said: “It (the loan) shows the kind of fraudulent way in which they manage this subsidy thing because if they required more money to handle importation, they should have gone into appropriation.
The Trade Union Congress, TUC, had also urged the National Assembly to fast-track the process of passing the Petroleum Industry Bill, PIB, saying politicians preferred continued existence of the NNPC with its shortcomings.
However, the NNPC spokesperson, Ms. Tumini Green, said the loan had not been obtained, although the process was being finalised.
The NNPC spokesperson said: “The loan has not been obtained yet. It is still being worked out. This is a purely business transaction and it is done in good faith. If you owe somebody, you have to look for how to pay. So, we are looking for money to pay our debts.”
Green said the loan deal was a crucial measure to help the corporation stay in business, insisting that by taking that step, NNPC had not contravened any aspect of the law establishing it as a state-run oil company.
She added: “Why would anybody not want us to pay off our debts, especially when it is done legitimately? I don’t think it is right.”
Sections 6 (1)(c) and 8 (1)(2) of the NNPC Act states: “The corporation, in fulfilment of its duties, can enter into contracts or partnerships with any company, firm or person, which in the opinion of the corporation will facilitate the discharge of the said duties under this Act.
“Subject to the other provisions of this section, the corporation may from time to time borrow by overdraft or otherwise howsoever such sums as it may require in the exercise of its functions under this Act and the corporation shall not, without the approval of the National Council of Ministers, borrow any sum of money whereby the amount in aggregate outstanding on any loan or loans at any time exceeds such amount as is for the time being specified by the National Council of Ministers.”
But former World Bank Vice-President, Dr. Oby Ezekwesili, in a tweet on Wednesday, also condemned the loan deal, insisting that the process was not transparent and that the deal was unnecessary.
Ezekwesili, a former Minister of Education and one-time chair of the Nigeria Extractive Industries Transparency Initiative, NEITI, condemned what she called “Counter-trade in 2013 to pay commodity traders opaque debt.” She warned that such financial recklessness and lack of transparency in the NNPC should not be allowed to continue.