FG Writes-off $5bn NNPC Debts Ahead IPO

The Federal Government has approved the write-off of about $5bn in debts owed by the Nigerian National Petroleum Company Limited (NNPC), part of moves to prepare the state-owned energy firm for a potential initial public offering (IPO) in 2028.

“The government is readying NNPC for a 2028 initial public offering. These debts were linked to production sharing contracts in which NNPC represents the government as concessionaire, domestic supply obligations, repayment agreements, modified carry arrangements, and royalties,” according to a report by Argus.

President Bola Tinubu approved the write-off of NNPC’s dollar-denominated debts totalling $1.42bn, alongside local currency liabilities amounting to N5.57tn.

The debts relate to production sharing contracts, domestic crude supply obligations, repayment agreements, and unpaid royalties.

NNPC had earlier indicated its intention to list part of the company on the stock market. Clearing legacy liabilities is a critical prerequisite for any successful listing, as potential investors would require clarity on the company’s financial position.

“NNPC is in the process of taking on sizable new debt, with talks ongoing for a $5bn crude-backed, forward sale loan from Saudi state-controlled Aramco,” according to industry sources.

The proposed loan would involve a special purpose vehicle created by NNPC, known as Green Falcon, taking the loan and using the funds to purchase discounted crude oil from NNPC under a forward-sale agreement.

The government says the debt write-off does not extend to an estimated $42.4bn from the 2011-2017 period, which remains disputed and unresolved.

NNPC maintains it remitted all revenues due to the federation during that period and owes nothing to the government.

“Clearing legacy debt off NNPC’s books in preparation for an IPO does not yet extend to $42.4bn from 2011-17, which the government said remains disputed and unresolved,” Argus reported.