NNPC Seeks $1bn in Oil Prepaid Deal to Revamp Refinery

The Nigerian National Petroleum Corporation (NNPC) has begun talks with trading firms to raise about $1 billion in a prepayment deal to refurbish its largest refining complex at Port Harcourt, it was learnt yesterday.

Reuters reported that if the financing is concluded, the long overdue rehabilitation of the refinery should reduce Nigeria’s hefty fuel import bill.


The development will mark Nigeria’s second oil-backed financing since the COVID-19 pandemic that has added to the difficulty of finding investors as fuel demand is sapped by lockdowns and renewable energy is gaining ground over fossil fuels.

The money will be repaid over seven years through deliveries of Nigerian crude and products from the refinery once the refurbishment is complete, Reuters quoted some sources as saying, adding that Cairo-based Afreximbank is leading the financing.

“Afreximbank is looking into a facility for the refurbishment of the Port Harcourt Refinery. However, the borrower is yet to be determined,” a spokesman for the bank told Reuters.

The sources said discussions were taking place with some foreign and Nigerian trading houses, including some who have previously worked with Nigeria, and who asked not to be named.

When contacted, a top source within the corporation told THISDAY that the NNPC wasn’t willing to make any comments on the matter for now. “No comment for now. We will speak about it at the appropriate time,” the source said.

Apart from the problems of the pandemic and increased investor preference for carbon-free energy, defaults and fraud in commodity trading, mainly in Asia, have reduced the appetite of foreign banks for exposure to commodity trade finance.

A source at one foreign bank, also asking not to be named, said it was unlikely to participate in Nigeria’s latest effort because of lower credit availability and increased reluctance to take out exposure in a high risk country.

Nigeria, Africa’s most populous country, has four refineries with a combined capacity of 445,000 barrels per day.

It has one in Kaduna and three in the oil-rich Niger Delta region at Warri and Port Harcourt. The Port Harcourt complex consists of two plants with a combined capacity of 210,000 bpd.

In 2019, the refineries lost some N167 billion naira ($439.47 million) and only Warri processed any oil, while in April 2020, they were all shut pending rehabilitation.

Nigeria has struggled with the poorly maintained units for decades, with successive NNPC chiefs and politicians announcing a series of unsuccessful plans to revamp, privatise or expand the refineries.

NNPC abandoned a similar attempt in 2019 to partner with oil traders, producers and engineering firms to fund refinery revamps after more than a year of talks, saying it would fund the projects itself.

The barely functional plants leave Nigeria completely dependent on imports and subsidy schemes also cost the country billions of dollars.

The federal government has said that it eliminated subsidies in March last year, but NNPC remains the sole petroleum importer, using some 300,000 barrels per day of oil to swap for fuel.

In December, NNPC opened a bid round for a contract to rehabilitate the Port Harcourt complex.

The Group Managing Director, NNPC, Mallam Mele Kyari, also said last year that private companies would run the refineries once they were rehabilitated.

In July, global energy trader, Vitol and Nigerian firm, Matrix, backed by banks, agreed to lend NNPC $1.5 billion to support its upstream arm, the Nigerian Petroleum Development Company (NPDC), although the discussions that led to the deal predated COVID-19.

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