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Nigeria’s National Economic Council (NEC) has approved the refinancing of the $3.3 billion Project Gazelle pre-export finance facility through a new $4.5 billion arrangement, “Project Gazelle 2,” in a move that underscores both the country’s persistent fiscal pressures and the centrality of oil backed financing to its short term macroeconomic management.

The approval, granted at the 159th NEC meeting held virtually on Monday, enables NNPC Limited to refinance the outstanding $1.5 billion balance on the 2023 facility while unlocking an additional $3 billion in liquidity. According to the presentation delivered by Vice President Kashim Shettima, prepared by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, the new arrangement is expected to bolster external reserves and support priority fiscal and infrastructure programmes.

NEC noted “the significance of unlocking additional liquidity to the federation,” according to a statement by Stanley Nkwocha, media aide to the vice president.

The refinancing comes at a time when Nigeria’s fiscal position remains constrained by weak oil production, high debt service obligations, and limited non-oil revenue mobilisation. Despite reforms in the petroleum sector and FX market, Nigeria continues to rely on oil-backed loans to stabilise reserves and manage foreign exchange volatility. This strategy reflects both structural dependence on crude exports and the slow pace of diversification.

Oil-backed facilities have become a recurring instrument for the state-owned oil company, NNPC Limited, and the federal government, particularly during periods of FX scarcity. The original Project Gazelle loan, arranged by Afreximbank in August 2023, was designed to support the naira and ease pressure on the FX market. Under that deal, Nigeria pledged crude oil volumes and prepaid future royalties and taxes, effectively securitising future oil revenues to meet immediate fiscal needs.

Oyedele said the new refinancing has been negotiated on more favourable terms. The volume of crude pledged has been reduced from 90,000 barrels per day (bpd) to 78,750 bpd – a 12.5 per cent reduction – freeing up an additional 11,250 bpd for the federation. This adjustment is significant given Nigeria’s ongoing struggle to meet its OPEC+ production quota, with output frequently constrained by pipeline vandalism, theft, underinvestment, and operational bottlenecks.

By reducing pledged volumes, the government aims to preserve more crude for direct sale, thereby improving dollar inflows and strengthening fiscal buffers. Oyedele said the arrangement “frees up resources for strategic national priorities while strengthening the country’s financing structures.”
However, analysts note that while improved terms offer short term relief, the reliance on oil backed loans highlights deeper structural issues: Nigeria’s limited fiscal space, weak revenue to GDP ratio, and the slow pace of reforms in the oil sector – including the full operationalisation of the Petroleum Industry Act (PIA), investment in upstream capacity, and the resolution of longstanding governance challenges at NNPC.

The refinancing approval comes amid broader economic reforms aimed at restoring macroeconomic stability. The government has embarked on FX market liberalisation, fuel subsidy removal, and efforts to expand non-oil revenue. Yet these reforms have also produced inflationary pressures and social strain, prompting Vice President Shettima to call for a “responsive, scalable, and data driven social protection policy” to address multidimensional poverty.

He emphasised that government decisions must reflect citizens’ daily realities – from food prices to healthcare and education – and urged NEC members to ensure policies “respond with competence, compassion, and purpose.”

Despite diversification ambitions, oil remains the backbone of Nigeria’s external sector. Crude exports account for more than 70 per cent of FX earnings, and oil-linked revenues remain critical for budget implementation. With production still below potential and global oil markets uncertain, Nigeria’s fiscal strategy continues to rely on instruments such as Project Gazelle to manage liquidity and stabilise reserves.

Project Gazelle Funding Ltd (PGFL), the Bahamas-based special purpose vehicle used for the original loan, will again serve as the borrower, with NNPC acting as sponsor and repaying through crude oil deliveries.

The refinancing signals NEC’s preference for maintaining liquidity buffers. At the same time, Nigeria works through a complex reform agenda – one that requires balancing fiscal prudence, social protection, and the long-term restructuring of the oil economy.