Dangote Refinery Responds to Misrepresentation of NNPCL’s $1 Billion Investment and Stake Deal

The Nigerian National Petroleum Company Limited (NNPCL) had previously stated that the federal government, through the company, secured a loan of $1 billion to support the Dangote refinery project.

NNPCL’s spokesman, Olufemi Soneye, made this statement during the Energy Relations Stakeholder Engagement in Abuja, emphasizing that “Under the visionary leadership of Mele Kyari, NNPC Ltd has achieved groundbreaking milestones, redefining the trajectory of Nigeria’s oil and gas sector.”

“A strategic decision to secure a $1bn loan backed by NNPC’s crude was instrumental in supporting the Dangote Refinery during liquidity challenges, paving the way for the establishment of Nigeria’s first private refinery. This initiative underscores NNPC’s dedication to fostering public-p

However, in a statement released yesterday, Anthony Chiejina, Group Chief Branding and Communications Officer, clarified, “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 (NNPCL) 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 the $1bn is just about 5% of the investment that went into building the Dangote Refinery.”

“Our decision to enter into a partnership with NNPCL was based on recognition of their strategic position in the industry as the largest off-taker of Nigerian crude and, at the time, the sole supplier of gasoline into Nigeria.”

“We agreed on the sale of a 20% stake at a value of $2.76 billion. Of this, we agreed that they would only pay $1 billion, while the balance would 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 of 2021, when the agreement was signed, the refinery was still in the pre-commission stage. In addition, if we were struggling with liquidity issues, this agreement would have been cash-based rather than credit-driven.”

He added, “Unfortunately, NNPCL was later unable to supply the agreed 300,000 barrels a day of crude, as they had committed a significant portion of their crude cargoes to financiers with the expectation of higher production, which they were unable to achieve.”

“We subsequently gave them a 12-month period to pay cash for the balance of their equity due to their inability to supply the agreed crude oil volume. NNPCL failed to meet this deadline, which expired on June 30th, 2024. As a result, their equity share was revised down to 7.24%. These events have been widely reported by both parties.”

“It is, therefore, inaccurate to claim that NNPCL facilitated a $1 billion investment amid liquidity challenges. Like all business partners, NNPCL invested $1 billion in the refinery to acquire an ownership stake of 7.24% that is beneficial to its interests.”

“NNPCL 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.”

What you should note

What is the Deal About?
The Investment: The Nigerian National Petroleum Corporation Limited (NNPCL) has invested $1 billion into Dangote Refinery.
What NNPCL Gets: In return for this investment, NNPCL has bought a 20% stake in Dangote Refinery. This means NNPCL now owns a minority share (not a controlling one) in the refinery.
Key Details of the Deal
Dangote Refinery:
It is one of the largest refineries in the world, with a capacity to process 650,000 barrels of oil per day.
Located in Lagos, it will produce products like petrol, diesel, and kerosene, helping Nigeria stop importing fuel.

Why This Deal?
Refining Oil in Nigeria: Nigeria produces a lot of crude oil but has very few refineries. The country has to import most of its petrol and other fuels, costing billions of dollars.
NNPCL’s Role: NNPCL is Nigeria’s government oil company. The investment in Dangote Refinery is part of a strategy to improve local oil refining and reduce dependence on imports.
Why Is This Important?
For Nigeria:
Less Importing: Once fully operational, the Dangote Refinery will allow Nigeria to refine more of its own oil, saving money that would otherwise go to foreign countries for refined fuel.
More Jobs: The refinery will create many jobs and help Nigeria’s economy by keeping more oil money in the country.

For NNPCL:
NNPCL is not running the refinery but owning 20% means they get some profits and will be more involved in Nigeria’s refining business.
Partnership: By partnering with Dangote, NNPCL is securing a stake in a business that can help Nigeria become energy self-sufficient.
What Happened Recently?
Misunderstanding: There was confusion in the media about the deal. Some reports suggested that NNPCL had bought a larger stake or had more control over the refinery than they actually do.
Clarification: Dangote Refinery cleared this up by saying that NNPCL only has a 20% minority stake, and Dangote Group remains in control of the refinery.

Summary of the Deal:
NNPCL’s $1 billion investment gives them a 20% share in Dangote Refinery.
This partnership is aimed at improving Nigeria’s refining capacity, reducing fuel imports, and boosting the local economy.
Dangote Refinery will help meet Nigeria’s huge demand for refined products like petrol and diesel, reducing reliance on imports.
Why It Matters:
Energy Security: Nigeria can refine more of its own oil and reduce spending on imported fuel.
Economic Benefits: This deal could create jobs and help keep more money in the country.
National Interests: NNPCL’s investment shows the government’s commitment to improving Nigeria’s oil and gas industry.