By Ayomide Otitoju
The Nigerian National Petroleum Company Limited (NNPCL) could continue servicing its crude-for-loan agreements until 2029, as the demand for oil by domestic refineries surges. This follows the commissioning of the Port Harcourt and Warri refineries and the $20 billion Dangote Refinery in Lagos, which have significantly increased local crude oil needs.
According to the Nigerian Upstream Petroleum Regulatory Commission, these refineries will require 123.48 million barrels of crude oil between January and June 2025. However, NNPCL remains committed to servicing its $8.86 billion crude-for-loan deals, which involve pledging 272,500 barrels of crude oil per day, equivalent to 8.17 million barrels monthly.
Crude-for-Loan Agreements Breakdown
Notable projects under these agreements include:
Project Panther: A $1.4 billion loan secured in 2022, maturing in 2029, with 23,500 barrels per day pledged as collateral.
Project Bison: A $1.04 billion facility obtained in 2021 to acquire a 20% equity stake in the Dangote Refinery, fully repaid by June 2024, pledging 35,000 barrels per day.
Project Eagle: Multiple tranches, including a $935 million tranche repaid in 2023 and a $900 million tranche maturing in 2028, with 21,000 barrels daily pledged.
Project Gazelle: A $3 billion forward sale agreement secured in 2023, maturing in 2028, with 90,000 barrels per day pledged.
Project Yield: A $950 million loan to support the Port Harcourt Refinery, maturing in 2029, pledging 67,000 barrels daily.
As of June 2024, NNPCL had repaid $2.61 billion, or 29.4% of its total loan commitments, leaving $6.25 billion outstanding.
Stakeholder Concerns and Expert Opinions
Sector operators have urged NNPCL to ensure sufficient crude supply for domestic refineries. The Independent Petroleum Marketers Association of Nigeria (IPMAN) emphasized that crude allocated for loans should not impact local refineries. IPMAN Publicity Secretary, Chinedu Ukadike, assured that standards set by the Organisation of Petroleum Exporting Countries (OPEC) guarantee adequate allocation for domestic use.
Meanwhile, energy expert Prof. Yemi Oke highlighted the flexibility of local refineries to source crude internationally, but noted that Nigeria’s “crude-for-naira” policy incentivizes domestic sourcing.
“If Nigeria sustains current reforms and increases production to over 2 million barrels per day, local refineries will have ample supply while NNPCL can meet export and loan obligations,” Oke said.
Call for Increased Crude Production
Industry stakeholders have stressed the need to ramp up crude production to meet local and international demands. National Vice Chairman of IPMAN, Hammed Fashola, argued that higher production levels would mitigate any negative economic impacts from crude-for-loan agreements.
Similarly, Petroleum Products Retail Outlet Owners Association of Nigeria Publicity Secretary, Joseph Obele, called for prioritizing crude supply to domestic refineries. He warned that failing to do so could render refineries inactive, undermining local fuel production and increasing import reliance.
“The government must renegotiate these agreements to ensure adequate crude allocation for local refineries,” Obele said, adding that boosting domestic fuel production would reduce pressure on the naira.
Moving Forward
NNPCL’s ongoing financial obligations underline the challenges of balancing debt repayment with rising domestic crude demand. Operators remain optimistic that with increased production, local refineries and loan commitments can coexist without disrupting the nation’s economic stability.
