UBA supports Nigeria’s oil production with $200m facility

Adebayo Obajemu

United Bank for Africa noted for it’s fidelity to corporate social responsibility, and auspicious interventions during national economic crises , has again move to boost the depressed national oil and gas sector reeling from the effects of the pandemic.

The leading lender made headlines once again for the right reasons, as the petroleum industry in Nigeria received a boost following the provision of $200 million for the sector by the United Bank for Africa (UBA) Plc.

Bank, in a statement on Wednesday, said it made the provision of the fund as an initial mandated lead arranger with a consortium of Nigerian commercial and international banks for $1.5 billion facility to support the Nigerian oil production and government revenue.
The $1.5 billion pre-export finance facility is to enable the forward sale of crude oil by the Nigerian National Petroleum Corporation (NNPC) and its upstream subsidiary, the Nigerian Petroleum Development Company

The intervention is meant to Nigeria’s crude oil production capacity.

The bank in a statement stating the deal said it will provide $200 million to support investment growth and liquidity requirements.

It said: “The facility will provide much needed capital for investment in NNPC’s production capacity, which is of strategic importance to the Nigerian economy and the country’s leading source of foreign exchange earnings.

“UBA’s position as Lead Arranger recognises the Group’s strength in structuring and deploying financing to the oil and gas sector, and the depth and liquidity of the Group’s balance sheet.

“The $1.5 billion facility is structured in two tranches.  The first tranche of $1 billion, to be repaid over a period of five years, will be provided in dollars, with UBA acting as the Facility Agent Bank.

“The second tranche of $500 million, will be provided in local currency, over seven years, with UBA acting as Lead Bank, providing $200 million in naira equivalent.

“Both facilities will be repaid from an allocation of 30,000 barrels per day of NPDC’s crude oil.  UBA has a strong track record in the resources sector across Africa, having facilitated oil prepayment deals with the NNPC, including its 2013 $100 million participation in the PXF Funding Limited transaction, and a further $60 million in the 2015 Phoenix Export Funding Limited transaction.

“In Senegal, UBA was responsible for the EUR 240 million revolving crude oil financing facility for the Société Africaine de Raffinage and in Congo Brazzaville co-funded the $250 million crude oil prepayment facility for Orion Oil Limited.

“Other participants in the NNPC deal include Standard Chartered Bank, Afrexim Bank, Union Bank and two oil trading companies, Vitol and Matrix.”

Commenting on the development, UBA’s Group Chairman, Tony O. Elumelu stated “This has been one of the most economically challenging years that Nigeria has witnessed.

“With the sharp drop in the price of oil and the ensuing hardship that followed the onset of the Covid-19 pandemic, the private sector must come together and contribute meaningfully to the economy.”

Analysts are of the view that this token will boost the capacity of the oil and gas industry in the country.

Dr.Olufemi Omoyele, of the Department of Business Management, Redeemers University told this newspaper that ” UBA has always done well in the area of boosting the economy, empowering small businesses and in the area of social responsibility. This latest effort in conjunction with consortium of banks will add value to oil and gas industry already battered by the effects of COVID-19.”