NNPC's Oil-for-Loan Plan

Oil refinery

The recent announcement by the Nigerian National Petroleum Corporation (NNPC) that it planned to borrow 1.5 billion dollars to pay off its debts has naturally elicited disquiet among Nigerians.
NNPC's Group Managing Director, Mr Andrew Yakubu said that the organisation needed the money badly to remain credit worthy. The loan plan has been severely criticised. Even the government's Debt Management Office, as well as the National Assembly, have expressed strong reservations.
The NNPC plan appears to have bypassed the power of the National Assembly to authorize procurement of loans by public corporations. Under the loan agreement, the NNPC is required to put up 15,000 barrels a day as collateral. According to reports the threats of law suits, coupled with court injunctions to attach the global assets belonging to the NNPC if it failed to pay up within a stipulated period, were some of the reasons it was necessary to borrow in order to pay off debts to foreign oil suppliers. According to NNPC officials, negotiations for the loan had been going on for over three years to offset the debts, some of which were incurred over three years back.
The Ministry of Petroleum Resources said that NNPC is indebted to the tune of 3.5 billion dollars. In 2010, the corporation resorted to swapping crude oil for refined products shipped from Cote d'Ivoire as a means of meeting the petrol supply requirements for domestic consumption.