NNPC negotiates $1bn loan to revive Port Harcourt refinery

The Nigerian National Petroleum Corporation (NNPC) is set to raise $1 billion loan to refurbish its largest refining complex at Port Harcourt.

The Port Harcourt complex consists of two plants with a combined capacity of 210,000 bpd.

Reuters quoting many sources familiar with the discussions, including the spokesperson for Afreximbank, reported that it has commenced discussions with some financial institutions on this.

The financing, when concluded, the report stated would lead to the rehabilitation of the refinery and reduce Nigeria’s hefty fuel import bill.

Nigeria has four refineries with a combined capacity of 445,000 barrels per day (bpd): one in Kaduna and three in Warri and Port Harcourt.

In April 2020, all refineries in Nigeria were shut pending rehabilitation. Nigeria has struggled with the poorly maintained units for decades.

The financing is also said to mark Nigeria’s second oil-backed financing since the COVID-19 scourge 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 would be repaid over seven years through deliveries of Nigerian crude and products from the refinery once the refurbishment is completed, the sources said.

Cairo-based Afreximbank is said to be 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 said.

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

Apart from the problems of COVID-19 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 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.

The NNPC had at different times announced a series of unsuccessful plans to revamp, privatise or expand the refineries.

The corporation abandoned a similar attempt in 2019 to partner oil traders, producers and engineering firms to fund refinery revamps after over 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.

In December, the NNPC opened a bid round for a contract to rehabilitate the Port Harcourt complex. The NNPC GMD, Mele Kyari, also said last year that private companies would run the refineries once they were rehabilitated.