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NNPC Gets Presidential Nod on $1.5 billion Loan

09 Jan 2013

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President Goodluck Jonathan


•Finance minister denies blocking payments to oil marketers


Chika Amanze-Nwachuku in Lagos and Chineme Okafor in Abuja with agency report


President Goodluck Jonathan has given his consent to the Nigerian National Petroleum Corporation (NNPC) to secure a $1.5 billion syndicated loan from Nigerian and international lenders led by Standard Chartered Bank Plc, to enable it to settle its huge indebtedness to foreign oil traders, THISDAY has learnt.


In a related development, the Federal Ministry of Finance yesterday confirmed that it had on December 31, 2012 released the N161.6 billion approved by the National Assembly as supplementary budget for subsidy payments.


The state oil company reportedly owes major commodity trading houses, including Glencore and Mercuria, about $3.5 billion in unpaid fuel supply bills.


Highly placed NNPC sources confirmed the corporation had secured the president’s approval to secure the loan, but explained that the syndicated facility was yet to be obtained, contrary to Reuters report on Monday that the corporation had already secured the loan.
THISDAY however gathered that discussions between NNPC’s top management and the banks involved in the deal are at advanced stages and that the deal would be “sealed in no distant time”.


General Manager, Government Relations at NNPC, Ms. Tumini Green, also confirmed in a telephone conversation with THISDAY that the loan had not been secured, but that discussions to that effect had reached advanced stages.


Green, who doubles as the spokesperson for NNPC, however, declined to comment on the presidential approval, adding that the corporation’s decision to seek for the syndicate loan was to enable it to offset its debts.


She said: “The loan has not been obtained yet. It is still being worked out. This is a purely business transaction and 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 argued: “If you are in business and owe somebody, you will be compelled to seek legitimate means of paying off your debts. That is exactly what we are doing and it is within the law. We are allowed to do our job as expected and there is no bad intention in that.”


Reacting to reports that the National Assembly may kick against the loan, especially in view of its recent approval of the supplementary budget last month to offset outstanding subsidy bills in 2012, Green queried: “Why would anybody not want us to pay off our debts, especially when it is done legitimately? I don’t think it is right.”


She, however, pointed out that the NNPC was yet to get any reaction from the National Assembly on the issue.
Green’s statement, nonetheless, coincided with yesterday’s reaction of the Senate, which expressed ignorance of the $1.5 billion loan being secured by NNPC.


To support its decision to borrow, NNPC said the law establishing the corporation authorises it to borrow in the exercise of its functions.


Sections 6 (1)(c) and 8 (1)(2) of the NNPC Act states:  “The corporation, in fulfillment 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.”


The petroleum ministry had in a report last year disclosed that NNPC was indebted to major commodity traders, including Glencore and Mercuria, to the tune of $3.5 billion in unpaid fuel supply bills.


A Reuters report yesterday, which cited a report last year commissioned by the ministry, stated that a list of creditors published in an oil report earlier this year, showed there were 35 firms still owed for fuel.


The list showed that Glencore was owed $138 million, Vitol was owed $198 million and Trafigura was owed $53 million.
The debts for some individual trading companies are widely thought to be much higher due to exposure via subsidiaries and partner firms.


For example, Bermuda corporate registration documents showed that Calson, owed $115.11 million by NNPC, was using Vitol's Geneva address.


Similarly, Napoil, owed $75.6 million, is a partner of Trafigura, its website showed.
The inability of the Federal Government to pay the corporation over $8.1 billion in outstanding subsidy claims is said to be straining its ability to import petrol and has strained its finances after private companies stopped importing early last year.


But giving an update on the subsidy payments, the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, said yesterday that the finance ministry had as at December 31, 2012 released the N161.6 billion approved by the National Assembly as supplementary budget for subsidy payments.


Okonjo-Iweala, in a statement by her media aide, Mr. Paul Nwabuikwu, refuted media reports (not THISDAY), which alleged that the ministry was blocking verified payments to marketers.


According to the statement, the finance ministry made the N161.6 billion supplementary budget for subsidy payments, which had been approved by the National Assembly, available to the Central Bank of Nigeria (CBN) since December 31, 2012.
The statement read: “The payments are presently going through the CBN’s processes which include the conversion of the dollar equivalent from the Excess Crude Account (ECA) and will be concluded soon.”


The release also noted that payments totalling N94 billion had been verified for 23 marketers who would be paid in the next few days.
“We are committed to paying all companies who deserve to get subsidy payments just as we will not pay undeserving firms. That is the mandate we have from the president,” the minister said.


Meanwhile, the Chairman, Senate Committee on Petroleum Downstream, Senator Magnus Abe, yesterday said that the legislature was unaware of the $1.5 billion loan that NNPC is in the process of securing to finance fuel imports.
He said in a statement in Abuja that NNPC had not informed the Senate about the transaction.


“As at yesterday afternoon, there was no record of the loan deal before us. We are still trying to confirm the loan from NNPC.
“The committee read about the loan deal in the newspapers like other Nigerians and we have had concerned Nigerians calling to ask whether the National Assembly approved the loan,” he added.


The senator explained that while the lawmakers were also worried about the development, there was no record of such a deal before the committee that has oversight over the corporation.


Also responding to THISDAY enquiries on the deal, Chairman, Senate Committee on Media and Public Affairs, Senator Enyinnaya Abaribe, corroborated Abe’s submission that the Senate did not approve the loan deal.


He said: “Under the law, no government agency can borrow without the approval of the National Assembly.
“We have to know if that was done first, but then the question to ask under the circumstances is: What happened to the N161 billion supplementary appropriation that was approved by the National Assembly to take care of the shortfall in the fuel subsidy budget, particularly to ensure steady supply of petroleum products during the yuletide?”


The loan, brokered by Standard Chartered Bank Plc, will be repaid over five-and-a-half years, while the NNPC has put up 15,000 barrels per day of its oil production as collateral.

Tags: Featured, News, Nigeria, NNPC, Presidential Nod, Goodluck Jonathan

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