The Minister of Petroleum Resources, Mrs. Deziani Alison-Madueke, and the management of the Nigerian National Petroleum Corporation on Monday denied that the corporation sourced a N1.56bn loan to settle debts it owed foreign suppliers of petroleum products.
The development surprised members of the House of Representatives Joint Committee on Petroleum Resources (Upstream & Downstream)/Aids, Loan and Debt Management/Justice, which is investigating the alleged loan.
The House had ordered an investigation into the loan in November last year after it observed that there was no such proposal in the 2013 budget or the 2012-2014 Medium Term Expenditure Framework already approved by the National Assembly.
But, as the investigative hearing opened on Monday in Abuja, the minister told the committee that the NNPC neither took a loan of $1.56bn nor was planning to do so.
She claimed that what the corporation did was to enter into a “forward sales agreement” with its international creditors that supplied products to the country in order to settle outstanding liabilities dating several years back.
Alison-Madueke said, “The NNPC has a legacy of liabilities and this has resulted in cash flow challenges.
“The Board of Directors approved this transaction; it was not a loan. There was no $1.5bn loan taken by the NNPC; but there is an internally accepted forward sales agreement to enable it offset fuel subsidy debts.”
She said the Ministry of Finance also approved the transaction.
Under the arrangement, the corporation will supply the creditors about 15,000 barrels of crude oil per day for a period of five years to liquidate the debt.
The Group Managing Director, NNPC, Mr. Andrew Yakubu, corroborated the minister’s presentation, saying the debt accrued over the years from the costs the corporation incurred on behalf of the Federal Government for fuel imports.
Yakubu said the costs included demurrage on imported products, pipeline vandalism and loss of products.
The GMD gave details on how the forward sales agreement was arrived at between the NNPC and its creditors, saying, “The forward sale structure has the following features: Enable NNPC to immediately forward sale 15,000 bpd of crude oil and raise the sum of $1.5bn to liquidate outstanding trade bills; The arrangement is based on a forward sale, which allows a future sale of agreed quantities of 15,000 bpd of crude oil to a Special Purpose Vehicle for a period of up to five years in consideration of the sum of $1.5bn paid by the SPV to NNPC.
“The $1.5bn will be used to off-set part of the petroleum imports bills; The borrower will be the SPV (an orphan company with shareholding by trustees established under a trust instrument) that has no connection with NNPC. The forward sale of crude oil by NNPC to the SPV will be a true sale at official selling price of Nigerian crude oil ruling at the date of lifting.
“The structure is the same as implemented on other recent NNPC-JV transactions and is, therefore, understood by the financing market.”
Yakubu informed the committee that the total outstanding debt of the NNPC was $3.5bn, adding that the $1.5bn only covered the first phase of the repayment agreement, which would leave a balance of $2bn.
Following these submissions, the lead Chairman of the committee, Mr. Ajibola Muraina, sought the views of the Debt Management Office on the matter.
The Director-General, DMO, Mr. Abraham Nwankwo, said from his understanding of the explanations of the minister and the NNPC GMD, they corporation did not take a loan.
He said there were no records of such a proposed loan with the DMO.
“They have not taken any loan on behalf of the Federal Government; so it is not within our jurisdiction”, he added.
Giving his position on the issue, the Chairman, Revenue Moblisation Allocation and Fiscal Commission, Mr. Elias Mbam, told the committee that he was initially under the impression that the transaction was a loan.