Emmanuel OchayiIn a development, the Nigerian National Petroleum Company Limited (NNPCL) unveiled its plan to prepay future royalties and taxes, totaling $3.3 billion, to the Federal Government from a financing deal secured with the African Export-Import Bank last year.
Breaking the news on Sunday night, NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, stated, “This is a financing agreement secured by NNPC Limited to prepay future royalties and taxes to the Federal Government.”
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The company revealed additional insights into the deal, known as ‘Project Gazelle,’ emphasizing a proactive approach to financial stability.
Adopting a lower price benchmark of $65/barrel for the crude-for-cash loan, NNPCL aims to minimize the risk of default and navigate potential fluctuations in oil prices. Currently, Brent, the global crude benchmark, stands at approximately $78/barrel.
NNPCL strategically earmarked 90,000 barrels of crude for ‘Project Gazelle,’ ensuring a steady cash flow for repayment and meeting other financial obligations.
Explaining their rationale, the company stated, “If oil prices rise, more money will come in from selling the 90,000 barrels, allowing for faster repayment. However, if oil prices fall, the repayment may be slower.”
This move by NNPC signals a calculated financial strategy, tying repayments to future oil sales and employing conservative pricing in oil sales contracts to mitigate risks associated with oil price volatility.
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