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The management of Dangote Refinery has said that, contrary to recent reports, the Nigerian National Petroleum Company Limited (NNPCL) did not secure a $1 billion loan to support the refinery during liquidity challenges.
Instead, the company invested $1 billion in the refinery to acquire a 7.24% stake, a beneficial ownership interest.
According to Anthony Chiejina, Group Chief Branding and Communications Officer, the partnership was based on NNPCL’s strategic position as the largest offtaker of Nigerian crude and sole supplier of gasoline.
He said, the agreement involved the sale of a 20% stake valued at $2.76 billion, with NNPCL paying $1 billion upfront and the remaining balance recovered over five years through crude oil deductions and dividends.
However, NNPCL failed to meet its obligations, unable to supply the agreed 300,000 barrels of crude per day. As a result, their equity share was revised down to 7.24% after missing a June 30, 2024 deadline to pay cash for the balance of their equity.
“NNPCL’s role in the Dangote refinery project has been misrepresented, and stakeholders are urged to adhere to the facts and present the narrative accurately. The company remains a valued partner in progress, and accurate reporting is essential for the benefit of stakeholders and the public.
The statement from Dangote Refinery read this:
ADDRESSING NNPCL’S MISINFORMATION
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 $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 offtaker 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 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 liquidity issue, this agreement would have been cash based rather than credit driven.
Unfortunately, NNPCL was later unable to supply the agreed 300 thousand barrels a day of crude given that they had committed a greater part 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 for them to pay cash for the balance of their equity given 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% stake 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.
Anthony Chiejina
Group Chief Branding and Communications Officer
18th December, 2024
