Dangote Refinery speaks on NNPC’s $1 billion loan

Dangote Refinery said on Wednesday that the Nigerian National Petroleum Company Limited (NNPC Ltd) $1 billion loan only represents about 5 per cent of the investment that went into building the refinery.

The company’s Group Chief Branding and Communications Officer, Anthony Chiejina, disclosed this in a statement on Wednesday.

The company made this known in reaction to a claim made by Olufemi Soneye, the chief corporate communications officer of NNPC Ltd.

Mr Soneye, while speaking at the energy relations stakeholder engagement held in Abuja on Monday, said a strategic decision to secure a $1 billion loan backed by NNPC’s crude was instrumental in supporting the Dangote Refinery during liquidity challenges.

According to him, the move paved the way for Nigeria’s first private refinery to be established.

In its statement on Wednesday, the Dangote Refinery said the NNPC Ltd’s $1 billion investment was not made to support the refinery during liquidity challenges, but rather to acquire a 7.24 per cent stake in the refinery.

“We have received numerous inquiries from the media and other concerned stakeholders seeking clarification on a recent report attributed to the Nigerian National Petroleum Company Limited (NNPC Ltd) that their decision to secure a $1 billion loan backed by its crude was instrumental in supporting the Dangote refinery during liquidity challenges.

“We would like to clarify that this is a misrepresentation of the situation as $ 1 billion is just about 5 per cent of the investment that went into building the Dangote Refinery,” the statement said.

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The Dangote Refinery said its decision to enter into a partnership with NNPC Ltd was based on recognition of its strategic position in the industry as the largest offtaker of Nigerian crude and at the time, the sole supplier of petrol into Nigeria.

“We agreed on the sale of a 20 per cent stake at a value of $2.76 billion. Of this, we agreed that they will only pay $1 billion while the balance will be recovered over a period of 5 years through deductions on crude oil that they supply to us and from dividends due to them.

“If we were struggling with liquidity challenges we wouldn’t have given them such generous payment terms. As at 2021 when the agreement was signed, the refinery was at the pre-commission stage. In addition, if we were struggling with a liquidity issue, this agreement would have been cash-based rather than credit-driven,” Mr Chiejina said.

Unfortunately, he said the NNPC Ltd was later unable to supply the agreed 300 thousand barrels a day of crude given that it had committed a greater part of its crude cargoes to financiers with the expectation of higher production which it was unable to achieve.

“We subsequently gave them a 12-month period for them to pay cash for the balance of their equity given their inability to supply the agreed crude oil volume. NNPC Ltd failed to meet this deadline which expired on June 30th 2024.

“As a result, their equity share was revised down to 7.24 per cent . These events have been widely reported by both parties. It is, therefore, inaccurate to claim that NNPC Ltd facilitated a $1 billion investment amid liquidity challenges,” he added.

Like all business partners, he said NNPC Ltd invested $1 billion in the refinery to acquire an ownership stake of 7.24 per cent, which benefits its interests.

“NNPC Ltd remains our valued partner in progress, and it is imperative for all stakeholders to adhere to the facts and present the narrative in the correct context to guide the media in reporting accurately for the benefit of our stakeholders and the public,” he said.

Equity

The 650,000 barrels per day Dangote Petroleum Refinery, located on the outskirts of Lagos, was inaugurated recently amid expectations that it will address some of the issues affecting the sector.

Although the NNPC initially had an equity of about 20 per cent in the refinery, it was subsequently reduced to 7.25 per cent.

Speaking at a press briefing at the refinery in July, the President of Dangote Group, Aliko Dangote, said NNPC Ltd owns only a 7.2 per cent stake in the refinery due to its failure to pay the balance of its share, which was due in June.

Confirming the development in a statement at the time, the NNPC Ltd said its assessment of the investment portfolio led to the decline in its share of the refinery.

It explained that the interest, worth $2.76 billion, was financed by a forward sale agreement of $1.036 billion, of which $1 billion was paid to Dangote Petroleum Refinery and Petrochemicals Free Zone Enterprise (DPRP FZE).

“The balance of the cost of equity investments made in DPRP FZE, which is USD1.76 billion, has been agreed to be paid in cash instead of the proposed crude discount of $2.5/bbl on the official selling price of crude oil,” the NNPC said.