The Nigerian National Petroleum Corporation has signed a $1.5bn prepayment deal led by Standard Chartered and backed by two oil traders, Vitol Group and Matrix Energy, Reuters reported on Tuesday.
Quoting sources said to be close to the development, the report said the deal provided Nigeria with much-needed cash after its finances were hit by the oil price crash in April as COVID-19 lockdowns erased nearly one third of global oil demand.
The financing package, called Project Eagle, was also backed by the African Export Import Bank and the United Bank for Africa.
Vitol and Matrix will each get 15,000 barrels per day of crude as repayment over five years, starting in August.
According to Reuters, Matrix, Nigerian trader, confirmed its participation in the deal.
Prepayments with traders are widely used in commodity finance as banks consider them to be one of the more secure forms of lending in countries viewed as risky.
For trading firms such as Vitol, these loans are ideal for securing long-term supplies and boosting razor-thin margins.
Sources were quoted as saying that the NNPC would use a large portion of the money to pay taxes owed by one of its subsidiaries, the Nigerian Petroleum Development Corporation.
The remainder will go towards operational expenses and capital expenditure. One of the sources said money from the prepayment could fund an upgrade of the Port Harcourt refinery.
The NNPC has been trying to raise cash through prepayments with traders for years.
However, the firm’s opaque finances and costly petrol subsidies have made it tough for it to secure private financing on attractive terms.
Nigeria announced the end of subsidies earlier this year.