By: Ecofin Agency

Nigeria has refinanced its flagship oil-backed loan under more favorable terms, reducing the amount of crude pledged as collateral and improving budget flexibility.

The National Economic Council (NEC), which includes the vice president, the governors of Nigeria's 36 states and key federal ministers, approved the refinancing of Project Gazelle on Tuesday, Aug. 4. Authorities originally established the crude-backed financing facility in 2023.

Under the original $3.3 billion arrangement, the state-owned Nigerian National Petroleum Company (NNPC Ltd.) borrowed U.S. dollars by pledging future crude oil deliveries as collateral. The government will now replace that facility with a new $4.5 billion financing package called Project Gazelle 2.

The refinancing immediately reduces the volume of crude committed as collateral. Finance Minister Taiwo Oyedele said pledged volumes will fall from 90,000 barrels per day to 78,750 barrels per day, representing a 12.5% reduction.

"Under the new arrangement, an additional 11,250 barrels per day will be returned to the federation, while the crude volumes pledged by NNPC Ltd. will be reduced," Oyedele said, according to comments reported by Punch Nigeria.

The released crude volumes will generate additional direct revenue for the Nigerian government.

In addition, Project Gazelle 2 will allow NNPC Ltd. to repay the approximately $1.5 billion outstanding balance under the original 2023 facility while unlocking an additional $3 billion in liquidity. Authorities said the new funding will strengthen Nigeria's foreign exchange reserves and finance priority infrastructure projects.

Nigeria's foreign exchange reserves underscore the scale of the challenge. According to data from the Central Bank of Nigeria, reserves stood at approximately $37.08 billion at the end of July, up by about $4 billion from January but still below the level generally considered sufficient to cover six months of imports.

Refinancing Reflects Three Years of Oil Sector Reforms

Nigeria's negotiating position has improved three years after the launch of Project Gazelle.

According to Punch Nigeria, the refinancing reflects NNPC Ltd.'s stronger bargaining position following three years of oil sector reforms designed to attract fresh investment from international oil companies and expand domestic production capacity.

Meanwhile, Nigeria's combined oil production reached 1.735 million barrels per day at the end of June, the highest level in 74 months, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

The NEC's approval marks only the first stage of the refinancing process. The government must still finalize the transaction with the lending banks.

Oyedele described the refinancing as a "double achievement," combining improved access to liquidity with stronger national financing structures, according to The Nigerian Observer.