Dangote Refinery and NNPCL Clash Over $1bn Investment Claims

Dangote Refinery and the Nigerian National Petroleum Corporation Limited (NNPCL) engage in a dispute, with each party rejecting the other’s claims regarding a $1 billion investment.

The Dangote Petroleum Refinery has responded to what it describes as incorrect and misleading statements from the Nigerian National Petroleum Company Limited (NNPCL) concerning the specifics of a $1 billion investment in its operations.

The refinery explained that the claim distorted the facts, which could potentially mislead stakeholders and the public regarding the extent and nature of the investment.

In a statement released on Wednesday, Anthony Chiejina, the Group Chief Branding and Communications Officer, clarified that the $1 billion crude-backed loan arranged by NNPCL constitutes just five percent of the overall investment for constructing the 650,000 barrels-per-day refinery.

During a stakeholders’ engagement meeting on Monday, NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, announced that the national oil company had obtained a $1 billion loan. He highlighted that this demonstrated NNPCL’s dedication to promoting public-private partnerships for economic development.

Dangote Refinery countered this narrative, calling it “misinformation.” The company emphasized that although the crude-backed loan aided its operations, depicting NNPCL as a significant contributor to the refinery’s financing is inaccurate, especially in light of liquidity issues.

The statement entitled “Addressing NNPCL’s Misinformation” stated, “We have been approached by various media outlets and concerned stakeholders seeking clarification regarding a recent report from the Nigerian National Petroleum Company Limited. This report suggests that their choice to obtain a $1 billion loan, secured against crude oil, played a significant role in supporting the Dangote refinery during financial difficulties.”

We want to clarify that this is a misrepresentation of the situation, as $1 billion represents only about 5 percent of the total investment made in constructing the Dangote Refinery.

Chijiena further elaborated that NNPCL had suggested a 20 percent stake investment, valued at $2.76 billion, in the Dangote Refinery back in 2021. However, this plan did not come to fruition because NNPCL was unable to provide the agreed-upon supply of 300,000 barrels of crude oil per day.

He also mentioned that NNPCL managed to invest $1 billion, representing an equity value of 7.24 percent.

The statement went on to say, “We decided to partner with NNPCL due to their strategic importance in the industry as they are the largest buyer of Nigerian crude and were, at that time, the only supplier of gasoline into Nigeria.”

We reached an agreement to sell a 20% stake valued at $2.76 billion, with the condition that they will initially pay only $1 billion. The remaining amount will be recovered over five years through deductions from the crude oil supplied by them and any dividends owed to them. If we were facing liquidity issues, such favorable payment terms would not have been offered.

As of 2021, when the agreement was signed, the refinery had reached the pre-commission stage. Furthermore, if we had been facing liquidity problems at that time, this agreement would have involved cash transactions rather than being credit-based.

Regrettably, NNPCL later failed to deliver the agreed 300,000 barrels of crude per day because they had allocated a significant portion of their crude shipments to financiers, anticipating higher production levels that were not met.

The statement noted that a 12-month grace period was given to the national oil company to meet its obligations. However, since these were still not fulfilled, its equity share has been downgraded to 7.5 percent.

He stated, “We later provided them with a 12-month period to pay cash for the remainder of their equity due to their failure to deliver the agreed crude oil volume. The NNPCL did not meet this deadline, which ended on June 30th, 2024. Consequently, their equity share was reduced to 7.24 percent. Both parties have extensively reported these developments.”

Consequently, it is incorrect to assert that NNPCL facilitated a $1 billion investment during liquidity challenges. Similar to other business partners, NNPCL invested $1 billion in the Refinery to obtain an ownership stake of 7.24 percent, aligning with its interests.

“NNPCL continues to be a vital partner in our progress, and it is essential for all stakeholders to stick to the facts and frame the narrative accurately. This will help ensure that media reports are precise, benefiting both our stakeholders and the public.”