Nigeria's state oil firm NNPC is in talks to raise around $1 billion in a prepayment with trading firms to refurbish its largest refining complex at Port Harcourt, seven sources familiar with the discussions said.

If the financing is concluded, the long overdue rehabilitation of the refinery should reduce Nigeria's hefty fuel import bill.

It would also mark Nigeria's second oil-backed financing since the COVID-19 pandemic that has added to the difficulty of finding investors as fuel demand is sapped by lockdowns and renewable energy is gaining ground over fossil fuels.

The money would be repaid over seven years through deliveries of Nigerian crude and products from the refinery once the refurbishment is complete, the sources said. Cairo-based Afreximbank is leading the financing.

"Afreximbank is looking into a facility for the refurbishment of the Port Harcourt Refinery. However, the borrower is yet to be determined," a spokesman for the bank said.

NNPC declined to comment. The sources said discussions were taking place with a range of foreign and Nigerian trading houses, including some who have previously worked with Nigeria, and who asked not to be named.

Nigeria, Africa's most populous country, has four refineries with a combined capacity of 445,000 barrels per day (bpd): one in the north at Kaduna and three in the oil-rich Niger delta region at Warri and Port Harcourt. The Port Harcourt complex consists of two plants with a combined capacity of 210,000 bpd.

In 2019, the refineries lost some 167 billion naira ($439.47 million), and only Warri processed any oil. In April 2020, they were all shut pending rehabilitation.

NNPC abandoned a similar attempt in 2019 to partner with oil traders, producers and engineering firms to fund refinery revamps after more than a year of talks, saying it would fund the projects itself.

The barely functional plants leave Nigeria completely dependent on imports, and subsidy schemes also cost the country billions of dollars. Nigeria says it eliminated subsidies, but the state's NNPC is effectively the sole gasoline importer, using some 300,000 barrels per day of oil to swap for fuel.