The real “Agba baller”

Tony Elumelu, a prominent figure in Nigeria’s financial sector, is flourishing under the current administration. His bank, United Bank for Africa (UBA), is poised to earn a substantial commission of approximately $66 million (or 66 billion naira) for orchestrating and facilitating the Afrexim-NNPC $3.3 billion loan deal. However, this achievement is just a part of a larger narrative.

In the previous year, Nigeria grappled with a severe dollar scarcity, leading to unprecedented spikes in the black market dollar rate.

The Group Managing Director of NNPC, Mele Kyari, driven by the desire to remain in favor with Bola Ahmed Tinubu and to secure a second term, initiated the acquisition of a $3 billion loan from the Afrexim Bank in Cairo. This strategic move was intended to stabilize Nigeria’s local currency.

UBA emerged as the chosen bank by NNPC to spearhead this significant project and transaction, primarily due to the bank’s majority shareholder’s favorable ties with the government. This decision reflected a confidence in UBA’s capabilities and its influential connections.

The contract with Afrexim Bank, established last year, encompasses several critical components:

1. Nigeria has committed 164.25 million barrels of crude oil, at a rate of 90,000 barrels per day starting from 2024, to repay the loan. This commitment is executed through Project Gazelle Funding Ltd., a special purpose vehicle based in the Bahamas. Consequently, NNPC has allocated 38.58 percent of its five-year tax and royalty oil towards securing the loan.
2. Nigeria’s pledge involves over $12 billion worth of oil. With the early 2024 valuation of Nigerian oil at $77.93 per barrel, the total value of the pledged oil amounts to approximately $12.8 billion, nearly triple the loan’s value.
3. To fulfill the repayment terms, NNPC will pre-sell 90,000 barrels per day of Nigeria’s offshore crude oil.
4. Under the existing Production Sharing Contract, Nigerian oil companies typically remit royalties and taxes in oil to NUPRC and FIRS. NNPC then exports this oil and transfers the proceeds to these agencies. However, with this new agreement, the revenue generated from 90,000 barrels per day will be allocated to service the loan for the upcoming five years.
5. The consortium of loan arrangers, led by UBA, stands to receive a $66 million commission for their role in the deal.
6. The loan incurs an annual interest rate of 11.85 percent on the $3.3 billion borrowed.
7. Currently, the loan funds are held by the Central Bank of Nigeria.

Elumelu’s financial success extends beyond this transaction. In 2023, Transcorp Hotel emerged as the top-performing stock on the Nigerian Stock Exchange. Elumelu’s publicly traded entities, ranging from the Transcorp Group to UBA, United Capital, and African Prudential, witnessed notable growth in both valuations and revenue.

Elumelu’s strategic support for the government and his astute business acumen have significantly contributed to his financial prosperity. With his continued success and the lucrative NNPC contract, he is rapidly approaching membership in the Forbes billionaire club.

Tony Elumelu’s journey, echoing the essence of Flavour’s song “Agba Baller,” exemplifies a tale of strategic alliances, government contracts, and financial triumph.