NNPC Settles $3bn Loan Using N991bn Worth of Crude – Report

The Nigerian National Petroleum Company Limited (NNPC Ltd) has reportedly used crude oil valued at about N991 billion to service part of the $3 billion emergency loan it secured last year to stabilise the foreign exchange market and support its operational obligations. The latest findings, sourced from internal industry assessments and disclosures by officials familiar with the repayment structure, indicate that crude oil swaps remain a central mechanism for meeting the company’s external financial commitments.

According to the report, the $3 billion loan—initially described as a crude-backed facility—was structured to allow NNPC to repay the debt by allocating portions of its crude oil output to its lenders. The arrangement, industry analysts note, offered the government short-term financial breathing room during a period marked by severe foreign exchange pressure, rising fuel import costs, and declining oil production.

The N991 billion crude allocation represents a significant portion of the financing instrument’s early repayment cycle. With global oil prices fluctuating between moderate highs and periods of volatility, the value of crude assigned toward servicing the loan has varied from month to month. Officials revealed that NNPC has continued to meet repayment obligations despite operational challenges affecting national crude output, including pipeline vandalism, theft, force majeure incidents, and production shortfalls across various fields.

NNPC’s decision to use crude as collateral was influenced by Nigeria’s constrained access to affordable international credit and declining investor appetite in the petroleum sector. By leveraging its most viable asset—crude oil—the company ensured that it could secure a substantial inflow of foreign currency while offering lenders a repayment assurance backed by daily production. This type of arrangement is not new, but it has become more crucial as Nigeria navigates economic reforms, particularly the removal of fuel subsidies and the unification of exchange rates.

Economists say the use of crude to settle debts underscores Nigeria’s long-standing reliance on oil as both a revenue source and a financial buffer. They also caution that dependence on crude-backed loans can reduce the volume of oil available for domestic refining and export sales, affecting revenue generation. The N991 billion crude repayment, they add, indicates how much of Nigeria’s production capacity is already tied to financial obligations.

Despite these concerns, NNPC officials argue that the loan has played a vital role in stabilising the economy. When the facility was secured, the government faced mounting forex shortages that threatened to drive the naira into deeper depreciation. The funds, partly used to ease demand pressure in the forex market, helped moderate volatility during the initial reform phase. Although challenges persist, authorities insist the intervention was necessary to prevent a more severe economic shock.

However, the revelation of continuing crude-for-debt repayment has reignited debate about transparency in Nigeria’s oil sector. Civil society groups have demanded more consistent disclosures on the terms of the loan, including repayment schedules, barrels pledged, and the long-term implications for national revenue. They argue that without such transparency, crude-backed deals create the risk of mortgaging national resources without public scrutiny.

Meanwhile, energy analysts highlight that Nigeria’s inability to meet its full OPEC quota further complicates the repayment structure. With daily production still below target, allocating crude for debt servicing reduces supply available for government revenue and domestic refinery feedstock. They warn that if production does not improve, Nigeria may find itself unable to meet obligations without compromising its fiscal projections.

More importantly, Nigeria’s dependence on imported petroleum products continues to place additional financial strain on the NNPC. Although the Dangote Refinery and other domestic refining projects are expected to reduce import costs significantly, until these facilities reach full capacity, NNPC remains burdened with high foreign exchange requirements for fuel imports. This financial pressure reinforces the company’s reliance on external loans and crude allocations to stay afloat.

Officials familiar with the repayment process insist that the crude servicing plan is on track and poses no risk of default. They maintain that NNPC’s diversified crude sources, including joint venture operations, production sharing contracts, and independents, provide enough supply to meet obligations. They also emphasise that repayment terms are flexible enough to accommodate fluctuations in production and price.

Nevertheless, the report’s findings continue to spark conversations about Nigeria’s broader economic strategy. Critics say the country must reduce reliance on borrowing backed by crude and instead focus on boosting production, strengthening security around oil infrastructure, and accelerating domestic refining. They argue that committing future crude output to service loans limits the government’s ability to address pressing fiscal needs such as infrastructure development, social services, and industrial growth.

In the coming months, analysts expect closer scrutiny of NNPC’s financial operations as Nigeria pushes for higher revenue amid ongoing reforms. The government is under pressure to improve transparency, boost oil production to at least 1.7 million barrels per day, and ensure that crude-backed loans do not compromise economic stability. With nearly N1 trillion worth of crude already used for repayment, stakeholders say the country must chart a more sustainable path that reduces overdependence on external borrowing and maximises the value of its natural resources.