Dangote Refinery faces a major setback as NNPC seeks a $2bn crude-backed loan. Discover the implications for Nigeria’s largest refinery.
According to TheCable, the NNPC Ltd is currently seeking a fresh $2 billion loan in Europe.
Insiders report that the purpose of this loan is to strengthen the firm’s operations, and it will be repaid with 35,000 barrels of oil daily.
Discussions have been held by Mele Kyari, the Group Chief Executive Officer of NNPC, regarding the acquisition of an oil-backed loan.
Considering that NNPC holds a restricted percentage share in Nigeria’s oil production, this agreement could potentially affect its access to resources significantly.
NNPC has pledged to provide crude oil for the Dangote refinery, with payment made in Nigerian naira.
Despite Nigeria’s current oil output being estimated at 1.3 million barrels per day, production sharing contracts that govern offshore drilling have caused their actual share to be less than half of this amount.
Despite a landing cost that exceeds N1,000 per litre, petrol is sold domestically in Nigeria for around N700 per litre due to various loans and crude swap deals already allocated by the country’s oil industry. The NNPC has consistently denied any ongoing fuel subsidies.
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Senior NNPC executives are presently in Europe endeavoring to secure loans, with a primary focus on Standard Chartered Bank located in the United Kingdom. However, advances have been somewhat restricted thus far.
Agreement of Afreximbank
It is not the first time that this loan has been sought. Back in August of 2023, NNPC managed to obtain a $3 billion loan backed by crude from Afreximbank. This was done with the intention of providing support for the naira and maintaining stability within the foreign exchange market.
Repayment involves handing over 164.25 million barrels of crude oil – equivalent to around 90,000 barrels per day – via Project Gazelle Funding Ltd; an SPV stationed within The Bahamas region.
When it comes down to disbursement dates, Afreximbank handed out $2 .25billion back in January before releasing another sum worth$925million throughout June’s duration as well!
Disagreements between Dangote Refinery and Industry
Stakeholders have taken note of the escalating tensions between industry regulators and the Dangote refinery. The facility encountered obstacles procuring domestic crude, but has been granted priority by NNPC to obtain it.
This move could lead to savings exceeding $610 million per month in fuel import expenditures for Nigeria according to Zach Adedeji, chairman of the Federal Inland Revenue Service.
Aliko Dangote, the refinery’s chairman alleged that on July 22nd, officials from NNPC, oil traders and terminals operate a blending facility in Malta. This particular plant is purported to blend re-refined oil with additives meant for lubricants but does not necessarily refine any crude oils itself.
Mele Kyari refuted owning a blending plant in Malta or having any association with NNPC employees involved in such operations. The panel on petroleum resources of the House of Representatives is looking into various allegations, which involve local refineries producing substandard products.
