11 January 2013

Nigeria: NNPC U.S.$1.5 Billion Loan Is Good Business Strategy, Say TUC, Pengassan

Photo: Leadership
Oil refinery

The Trade Union Congress (TUC) has described the decision of the Nigerian National Petroleum Corporation (NNPC) to secure a $1.5 billion syndicated loan to help it pay debts to international fuel traders as a good business proposal only if the organisation is being allowed to run as a commercial entity.

The President General of the TUC, Peter Esele, in a telephone conversation with THISDAY however lamented that the corporation had been reduced to a 'mere kerosene and fuel importer' instead of it being allowed to explore its potentials as other state-owned oil corporations across the globe.

"If NNPC is running like a business, $1.5 billion is not too much for them to borrow to offset debts, but government will not allow it to run that way because everyone feeds off NNPC. NNPC said they have to borrow so that their credit rating would not drop and so that they can borrow in the future," he said.

Esele called on the members of the National Assembly to do what is right for the nation by enacting a law that would free the NNPC from government control.

He, however, expressed pessimism at the ability of the National Assembly members to do what is right for the country due to personal interests.

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) also backed the idea hailing it as a welcome development, but called for due diligence in the application of the loan facility.

It also asked the Federal Government to take a cue from the action of the NNPC and henceforth encourage its various agencies to seek sustainable means of financing their operations other than consistently waiting for annual budgetary hand-outs from the federal coffers.

President of PENGASSAN, Mr. Babatunde Ogun, told THISDAY over the phone that the development was welcomed as long as it would achieve intended purposes.

He said: "If the loan will guarantee that our refineries will work at optimum again, that is good but there should be a form of guarantee from whoever would be contacted to refurbish the refineries such that if the loan is not aptly applied, we can then recover it. There is nothing wrong with NNPC borrowing money to finance its operations so far it is done with due diligence."

NNPC had described its decision to seek the loan facility as a crucial measure to help it stay in business and that it had not contravened any aspect of the law establishing it as a state-owned oil company.

Accordingly, the loan deal which has several Nigerian and international banks on board and brokered by Standard Chartered Bank Plc, was purely a business transaction aimed at helping the corporation to offset its debts and also stay above waters.

The loan is expected to be paid back over five and a half years with the corporation putting up 15,000 barrels per day of its oil production as collateral.

Standard Chartered and South African lenders, Standard Bank Group Ltd and Nedbank Group Ltd, were among the banks reported to be involved in the deal.

Also, Sections 6 (1c) and 8 (1, 2) of the NNPC Act No 33 of 1977, allow it to in fulfillment of its duties: "Enter into contracts or partnerships with any company, firm or person which in the opinion of the corporation will facilitate the discharge of the said duties under this Act." "Subject to the other provisions of this section, the corporation may from time to time borrow by overdraft or otherwise howsoever such sums as it may require in the exercise of its functions under this Act and the corporation shall not, without the approval of the National Council of Ministers, borrow any sum of money whereby the amount in aggregate outstanding on any loan or loans at any time exceeds such amount as is for the time being specified by the National Council of Ministers."

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