Tony Elumelu’s Financial Triumphs: UBA to Earn $66 Million from Afrexim-NNPC $3.3 Billion Loan Deal

In the world of finance, Tony Elumelu, the charismatic business tycoon and majority shareholder of United Bank for Africa (UBA), is making headlines once again. Under the current government, UBA is poised to earn a substantial commission of $66 million from facilitating the Afrexim-NNPC $3.3 billion loan. However, the financial success story doesn’t end there.

The backdrop to this lucrative deal is rooted in Nigeria’s struggle with a scarcity of dollars, leading to a fluctuating black market exchange rate. Seeking a solution, the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, orchestrated a strategic move to secure a $3 billion loan from Afrexim Bank based in Cairo, aiming to stabilize the country’s volatile local currency.

Choosing UBA as the lead facilitator for the entire project, Kyari was likely influenced by Elumelu’s close ties with the current government. The agreement with Afrexim Bank, negotiated last year, reveals key points that shed light on the magnitude and implications of the financial transaction.

**Key Points of the Afrexim-NNPC Loan Agreement:**

1. **Crude Oil Pledge:** Nigeria pledged a total of 164.25 million barrels of crude oil, equivalent to 90,000 barrels per day, starting in 2024 to repay the loan through Project Gazelle Funding Ltd. This “orphan” special purpose vehicle incorporated in the Bahamas will secure the loan, with the NNPC pledging 38.58 percent of five years’ worth of tax and royalty oil.

2. **Value of Pledged Oil:** At the beginning of 2024, a barrel of Nigerian oil was valued at $77.93 on the international market. With 164.25 million barrels pledged, Nigeria effectively borrows $3 billion but commits to repay $12 billion, making it a substantial financial undertaking.

3. **Repayment Mechanism:** To repay the loan, the NNPC will forward-sell 90,000 barrels per day of Nigeria’s share of offshore crude oil under the production sharing contract (PSCs) with oil companies.

4. **Production Sharing Contract (PSC) Impact:** Revenue from 90,000 barrels per day, which would typically contribute to the federation account, will now be used exclusively to service the loan over the next five years.

5. **Commission for Loan Arrangers:** UBA, as the lead facilitator, will earn a commission of $66 million, equivalent to 2 percent of the $3.3 billion facility.

6. **Interest Rate:** Nigeria will pay an interest rate of 11.85 percent per annum on the $3.3 billion “pre-export finance facility” (PxF) arranged by Afrexim Bank.

7. **Disbursement:** The funds have been disbursed and are currently held by the Central Bank of Nigeria.

Beyond this financial triumph, Tony Elumelu had a stellar year in 2023, with his businesses experiencing significant growth. Notably, Transcorp Hotel emerged as the best-performing stock on the Nigerian stock exchange. The valuations and revenues of publicly quoted businesses under his leadership, including Transcorp Group, UBA, United Capital, and African Prudential, all witnessed remarkable growth.

Tony Elumelu’s remarkable success in 2023 positions him as a potential future entrant into the Forbes billionaire club. His unwavering support for the current government has proven to be a strategic bet that paid off handsomely, showcasing him as the epitome of financial success and resilience. As the year begins with the NNPC deal, Elumelu demonstrates that he is not slowing down anytime soon, solidifying his status as a true business icon.

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