Reps Halt NNPCL's $3bn Crude Oil Loan

Mele Kyari 

NNPCL's $3bn loan deal suspended by house...

House of Representatives Special Joint Committee orders NNPCL to halt plans to use future crude oil as collateral for loans amid investigation into alleged irregularities, citing potential harm to revenue generation and local refining capacity.

The House of Representatives Special Joint Committee, responsible for investigating challenges in the petroleum sector, has directed the Nigerian National Petroleum Company Limited (NNPCL) to put on hold its plans to use future crude oil as collateral for loans. This instruction comes as the committee, chaired by Ikenga Ugochinyere, continues its probe into alleged irregularities in the sector, which began last week.

The committee's decision was triggered by reports that NNPCL plans to secure an additional $2 billion in loans from international lenders, using crude oil as collateral, to boost its financial resources. The committee has ordered NNPCL to suspend this plan pending the outcome of its investigation, which aims to uncover the truth behind the questionable dealings in the sector.

The House of Representatives panel revealed that NNPCL's Group Chief Executive Officer, Mele Kyari, disclosed the company's ongoing negotiations with international creditors to secure a credit facility backed by oil. This comes as NNPCL grapples with a $6 billion debt owed to international oil traders, which has been exacerbated by the removal of subsidies.

In a statement issued on Wednesday, July 31, Chairman Ikenga Ugochinyere warned NNPCL against undermining the House of Representatives' forensic investigation by pursuing another loan. Ugochinyere cautioned that securing additional loans could compromise the integrity of the investigation and potentially worsen NNPCL's financial woes.

He cautioned that proceeding with the loan plan would worsen the situation, starving refineries of crucial feedstock, compromising revenue generation, and paving the way for potential future mismanagement of funds.

The statement reads, “The citizens were excited on the recent news of President Bola Tinubu's intervention for crude supply to local refineries in naira and the committee has received intel of plans to mortgage future crude revenue and oil for another loan at a time the nation is struggling.

“This is preemptive of the committee's work and we want to announce the halt of this fresh move and for the state oil company to brief the parliament.

“The revenue being mortgaged is a sovereign wealth of the people and the parliament has a duty as the watchdog of the commonwealth to step in. The NNPCL today is owned by the Federal Government and Nigerians, hence, its actions must not hurt their shareholders who we lawmakers represent.

“We gathered you here today on a shocking development and alleged move by the leadership of NNPCL to mortgage once again our future crude oil assets and revenues for alleged mere administrative purposes.

“As the Chairmen of the Joint Investigative Committees on Petroleum Resources Midstream and Downstream, we have to act in the best interest of the citizens and ensure that the downstream and midstream sectors are protected.”

Chairman Ugochinyere emphasized that the committee's current investigation is centered on two key issues: allegations of unauthorized withholding of funds from the federation account and the failure to supply crude oil to domestic refineries, as required.

The panel warned NNPCL against defying the Federal Government's recent directive, which stresses the need to prioritize and support local refining capacity. By pursuing another oil-backed loan, NNPCL risks contravening this directive and undermining efforts to boost domestic refining capabilities.

The statement further read, “We are calling on NNPCL to halt further plans to borrow more loan with crude oil, as the move will sabotage the President's deal for domestic crude supply.

“In August 2023, following the removal of fuel subsidy and the unification of the forex market which significantly weakened the naira, the Federal Government through the NNPCL secured a $3.3 billion loan from Afreximbank to shore up liquidity in the market.

“Mele Kyari had explained then that the loan would be used to shore up the foreign exchange reserve and provide a more urgent solution to the country's forex challenges.

“The loan is said to be paid with crude oil set a $65 per barrel and had earmarked around 90,000 barrels of crude oil for the process. We are urging the NNPCL not to undermine the forensic investigation by the House of Representatives into crude oil supply with another fresh loan, as the move is a threat to local refinery.”