Dangote Refinery Debunks Claims of Financial Struggles in $1bn Deal with NNPCL

The Dangote Petroleum Refinery has clarified its partnership with the Nigerian National Petroleum Company Limited (NNPCL) following statements suggesting the company secured a $1 billion crude-backed loan to support the refinery project during financial difficulties.

In a statement on Wednesday, the refinery outlined the terms of its agreement with NNPCL, explaining that it sold a 20% stake valued at $2.76 billion to the oil corporation. As part of the arrangement, NNPCL agreed to pay $1 billion upfront, with the balance to be recovered over five years through deductions from crude oil supplied to the refinery and dividends.

NNPCL’s Head of Corporate Communications, Olufemi Soneye, had earlier stated during an Energy Relations Stakeholder Engagement in Abuja that the loan was crucial in addressing the refinery’s liquidity challenges. “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,” he said.

However, Dangote Refinery dismissed these claims as inaccurate. Anthony Chiejina, Group Chief Branding and Communications Officer, stated that the $1 billion loan represents just 5% of the total investment in the refinery and denied any financial struggles during its development.

According to the statement, the partnership with NNPCL was based on the corporation’s role as the largest off-taker of Nigerian crude and the sole supplier of gasoline to the country at the time. The refinery maintained that its operations were financially stable, emphasizing that generous payment terms offered to NNPCL reflected this stability. “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,” the statement said.

The refinery also addressed NNPCL’s inability to meet a key contractual term, which involved supplying 300,000 barrels of crude oil daily. NNPCL reportedly committed a significant portion of its crude cargoes to financiers, expecting higher production volumes that did not materialize. Consequently, Dangote Refinery allowed a 12-month period for NNPCL to pay cash for the remaining equity balance. However, when NNPCL failed to meet the deadline, its equity share was reduced to 7.24% as of June 30, 2024.

The refinery emphasized that the $1 billion investment was for NNPCL to acquire a beneficial ownership stake, not as a bailout during liquidity challenges. “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,” the statement said.

While affirming NNPCL as a valued partner, Dangote Refinery urged stakeholders to ensure accurate narratives and factual reporting for the benefit of the public and all involved parties.