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* State-oil firm borrows $1.5 bln to pay fuel debts
* BNP Paribas, Standard Chartered, Natixis among lenders
* NNPC puts up oil money to help pay back $3.5 bln debt
By Chijioke Ohuocha
LAGOS, Jan 8 (Reuters) - Nigeria's state-owned oil company NNPC is borrowing from at least 10 banks and using revenue from oil production to help clear a long-overdue $3.5 billion debt owed to foreign fuel traders, a banking source close to the deal said on Tuesday.
NNPC struck a deal led by Standard Chartered Bank at the end of last year to borrow $1.5 billion from a mixture of foreign and Nigerian banks over a period of five and a half years priced at 375 basis point over Libor, the banking source told Reuters.
The foreign banks providing funds include France's BNP Paribas, Standard Chartered, Natixis, multilateral lender Afrexim Bank, a local unit of Standard Bank and Korea's MMC, while the Nigerian banks were United Bank for Africa, Ecobank, First Bank and Union Bank, the source told Reuters.
The top African oil producer's NNPC owes major commodity trading houses, including Glencore and Mercuria, around $3.5 billion in unpaid fuel supply bills, according to a report last year commissioned by the Nigerian oil ministry.
The last ditch deal is seen as crucial to easing the burden on big commodity traders facing the prospect of painful multi-million dollar write-offs on those bills and saving Nigeria from defaulting on the loans, which would have worried credit agencies that recently upgraded the country.
The NNPC agreed to put up 15,000 barrels per day of its oil production as collateral when the loan negotiations began last year, the banking source said.
The company has already earned $404 million from that committed oil since talks began, and it will add those funds to the $1.5 billion borrowed to pay its debt to oil traders, the source said. NNPC declined requests for official comment.
The repayment of these debts will provide some relief to a Nigerian fuel industry in disarray as trading firms have been battling for months to recoup the money and some have since stopped supplying Nigeria with fuels.
Despite being among the world's top 10 crude oil exporters, poor governance, graft and dilapidated refineries mean it has to import most of its fuel needs, on which is pays costly subsidies to keep a lid on retail petrol prices.
Government-funded fuel imports do not guarantee enough petrol for Nigerians. The artificially low price means fuel often runs out or gets smuggled to neighbouring nations.
Traffic queues snaking for hundreds of metres outside pump stations are a common sight.
President Goodluck Jonathan attempted to end the corrupt fuel subsidy scheme in Nigeria a year ago but backed down after it sparked widespread protests against higher fuel costs.
NNPC is the biggest buyer of fuel from importers but the state-firm is debt-ridden and hampered by mismanagement and corruption and increasingly it has to swap the country's crude oil for fuel because banks won't provide lines of credit.
A long-delayed oil bill currently before parliament proposes a widespread overhaul of NNPC, including splitting it up and incorporating part of it, and listing the new corporate on Nigeria's stock exchange.