Fuel Debt to Traders Halved

Nigeria has repaid $1.4bn in mostly overdue debts to fuel traders after raising the money via an oil prepayment loan from international lenders, successfully concluding some of the most painful and lengthy debt talks in its history. The $1.4bn repayment, which follows a smaller payment to creditors of $400m earlier this year, will allow the country to halve its fuel debts to $1.7bn, sources at three trading companies told Reuters. It will ease the threat of large write-downs for big trading houses, oil firms and Nigerian banks, as well as lowering the risk of insurance claims and legal action from traders, bankers and insurers against the Nigerian National Petroleum Corporation (NNPC). Had Nigeria defaulted on these loans it could have restricted the future borrowing capacity of Africa’s second largest economy just as it was preparing to issue a $1bn Eurobond

“The fact that this debt was not solved was creating a lot of tensions – both for Nigeria’s desire to put its finances in order and for traders, because a lot of these debts were massively overdue,” said a high-level source at a major trading house. The prepayment facility, guaranteed by future oil sales, was led by Standard Chartered and also included BNP Paribas, Societe Generale, Natixis and several Nigerian banks. The funds were used to settle old debts of state oil firm NNPC’s marketing unit PPMC for gasoline and jet fuel imports made three years ago. The loan was agreed back in December but it took six months for the money to be disbursed as the deal structure needed to be validated with multiple stakeholders and Nigerian authorities, sources said.

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