Corruption and mismanagement have forced the Nigerian state oil firm NNPC back to foreign and local bankers, hat in hand, for a new $1.5 billion syndicated loan which will keep Nigeria in debt for a lengthy time.
A senior banking source told Reuters that the loan deal was struck at the end of last year. The new borrowing was required to pay back older loans to big commodity traders and keep them from losing their shirts with painful multi-million dollar write offs, oil trading sources told Reuters.
The latest loan was provided by several Nigerian and international banks and brokered by Standard Chartered. The NNPC put up 15,000 barrels per day of its oil production as collateral, the banking source said.
Had Nigeria defaulted, it could have restricted the country's future borrowing capacity and would have worried credit agencies like Fitch and Standard and Poors, which recently upgraded Nigeria, Reuters observed.
The NNPC currently owes major commodity trading houses, including Glencore and Mercuria, around $3.5 billion in unpaid fuel supply bills, according to a report last year commissioned by the Nigerian oil ministry.
The root of the problem is the country’s failure to build refining capacity able to meet domestic needs. Therefore Nigeria must buy refined oil on the open market at high prices. To keep a lid on domestic protests, the government pays costly subsidies that keep oil affordable to the population.
Decades of mismanagement and corruption have left NNPC heavily indebted, several audits have shown.
A list of creditors published in an oil report earlier this year showed there were 35 firms still owed for fuel.
Trading companies have been battling for months to recoup the money and some have since stopped supplying Nigeria with fuels. But most have stayed, partly because of huge opportunities in the upstream sector.
The list showed that Glencore was owed $138 million, Vitol was owed $198 million and Trafigura was owed $53 million.
In reality, 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.