Nigeria: the country is refinancing its oil debt under more favorable terms.

Nigeria has initiated the restructuring of Project Gazelle, one of its main financial arrangements secured by oil revenues. The refinancing operation was approved by the National Economic Council, which includes federal authorities and governors from the country’s 36 states.

This approval paves the way for the renegotiation of the terms applied to the financing. However, the information communicated at the end of the meeting does not specify the new conditions obtained from creditors, the balance involved, or the timeline planned for implementing the agreement.

Project Gazelle is not a typical sovereign loan. It is a structured prepayment facility backed by a forward sale of crude oil, established under the sponsorship of the state-owned company NNPC Limited. A dedicated structure receives the funds in exchange for a commitment concerning future shipments of crude. The funds raised were primarily aimed at prepaying taxes and oil royalties owed to the federal government.

The financing was initially announced for an amount of $3.3 billion. After an initial mobilization of funds, Afreximbank provided an additional $925 million in June 2024, bringing the total amount actually financed to $3.175 billion.

Up to 90,000 barrels mobilized each day

To ensure repayment, NNPC had earmarked up to 90,000 barrels of crude oil per day. The arrangement was based on a prudent reference price of $65 per barrel, aimed at limiting the risks associated with fluctuations in the oil market.

According to the 2024 financial statements of the oil company, 4.9 trillion naira had been drawn from a total facility of 5.1 trillion naira. Shipments of crude valued at 991 billion naira had already been used for repayment, leaving a balance of 3.8 trillion naira at the end of the fiscal year.

This type of agreement allows the state or the national company to obtain immediate liquidity, but commits a portion of future oil revenues. The proceeds from the shipments allocated for repayment are first used to honor the debt before any potential surplus is returned to the seller.

The refinancing could allow for changes to the schedule, the cost of financing, or the terms of allocation of the shipments. In the absence of publication of the new clauses, it is not yet possible to determine whether the operation will reduce the daily volume of oil mobilized or if it will merely extend the repayment period.

This issue is significant for Nigerian public finances. Project Gazelle adds to several other oil-backed agreements, while a significant portion of national production is already allocated to servicing various financial obligations.

An estimate based on NNPC’s published commitments assessed the volumes associated with four major oil financings at 213,000 barrels per day, including 90,000 for Project Gazelle alone. However, these calculations remain dependent on delivery schedules, crude prices, and the specific terms of each contract.

The publication of the renegotiated conditions will be necessary to measure the real effect of the refinancing on the Federation’s revenues, NNPC’s debt service, and the quantity of oil available for ordinary exports.