NNPC Explains Reduction of Stake in Dangote Refinery

NNPC provides details on why it reduced its stake in Dangote Refinery. Discover the strategic reasons behind this significant financial decision.

NNPC Ltd has explained the rationale for its decreased ownership in the Dangote Refinery, revealing a noteworthy change in its approach to investing.

As per NNPC Ltd’s audited financial statement for 2023, the company had intended to procure a 20% interest in Dangote Petroleum Refinery and Petrochemicals Free Zone Enterprise (DPRP FZE) as of September 2021.

The agreement, worth $2.76 billion, was set to be financed in part by a forward sale arrangement totaling $1.036 billion from Lekki Refinery Funding Limited. DPRP FZE has already received payment of $1 billion towards this amount.

The investment was initially placed in trust under NNPC Greenfield Limited, a wholly-owned subsidiary of NNPC Ltd. However, after the restructuring post-Petroleum Industry Act (PIA), its management got transferred to NNPC Downstream Investment Service (NDIS).

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Nevertheless, the outstanding amount of $1.76 billion needed to finalize the equity investment was meant to be settled in cash instead of utilizing a previous strategy that involved offsetting it with a discount on crude oil worth $2.5 per barrel at the official selling price.

However, NNPC Ltd could only secure 7.25% ownership stake in DPRP FZE by the conclusion of 2023 as opposed to their original goal of attaining 20%, which they attributed directly to being unable meet their monetary obligations for payment through an announcement made by them stating this fact affirmed my statement earlier on.

During a press briefing, Aliko Dangote, the President of the Dangote Group, verified that NNPC’s share had decreased. He explained that due to their inability to settle outstanding payments in June, the national oil company now owns just 7.2% of the refinery.

Following a periodic evaluation of its investment portfolio, NNPC Ltd clarified that it opted to decrease its share in the refinery. This intentional modification exemplifies an analysis of the enterprise’s investment preferences amidst fluctuating financial circumstances and reorganization endeavors.

In January 2024, diesel and aviation fuel production commenced at the Dangote Petroleum Refinery which has a capacity of 650,000 barrels per day. To enhance its operations for local market use by April that year; NNPC Ltd provided extra one million barrels of Bonny Light crude oil in support to the refinery’s efforts.

The progress achieved by NNPC Ltd as Dangote Refinery gears up to meet the nation’s requirement for refined petroleum products is a crucial juncture in Nigeria’s energy industry.