Emmanuel OchayiThe Dangote Petroleum Refinery has accused the Nigerian National Petroleum Company Limited (NNPCL) of providing inaccurate information about its $1bn investment in the refinery. According to Dangote Refinery, NNPCL’s claims mislead stakeholders and the public regarding the extent and nature of the investment.
On Monday, NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, announced at a stakeholder engagement meeting that NNPCL had secured a $1bn crude-backed loan to support the Dangote Refinery’s 650,000 barrels per day capacity. Soneye portrayed this move as a strategic effort to boost public-private partnerships and drive economic growth.
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In response to Soneye’s remarks, Dangote Refinery issued a statement on Wednesday, signed by its Group Chief Branding and Communications Officer, Anthony Chiejina. The statement, titled “Addressing NNPCL’s Misinformation,” dismissed NNPCL’s claims as inaccurate and misleading.
“We have received numerous inquiries from the media and stakeholders seeking clarification on a report from NNPCL suggesting that its $1bn crude-backed loan was instrumental in supporting Dangote Refinery during liquidity challenges. This is a misrepresentation of facts,” Chiejina stated.
Investment Breakdown at Dangote Refinery
Chiejina explained that the $1bn represents only 5% of the total investment required to build the 650,000-barrel-per-day capacity refinery. He emphasised that the claim of NNPCL’s crucial support during liquidity challenges is false, adding that the investment was part of a broader equity arrangement.
“Our partnership with NNPCL was based on their strategic role in the industry as the largest offtake of Nigerian crude and a key supplier of gasoline into Nigeria,” Chiejina noted.
According to Dangote Refinery, NNPCL’s proposed 20% equity stake in the refinery, valued at $2.76bn, never materialised because NNPCL failed to deliver the agreed 300,000 barrels per day of crude oil. Consequently, the equity stake was revised to 7.24%, with NNPCL’s $1bn investment serving as part of its stake in the refinery.
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Why NNPCL’s 20% Stake Proposal Fell Through
In 2021, NNPCL proposed to acquire a 20% stake in Dangote Refinery at a value of $2.76bn. The arrangement allowed NNPCL to pay $1bn upfront, with the balance to be paid over five years via deductions on crude oil supplied to the refinery and dividends from the investment. However, NNPCL’s inability to meet its crude oil supply obligations caused the deal’s terms to be revised.
“As of 2021, when the agreement was signed, the refinery was at the pre-commission stage,” Chiejina explained. “If we were facing liquidity challenges, this agreement would have been cash-based, not credit-driven.”
Revised Equity Stake and Missed Deadlines
Dangote Refinery revealed that it granted NNPCL a 12-month grace period to fulfill its obligations to supply crude oil as part of the 20% equity stake deal. When NNPCL failed to meet this deadline, its equity stake was downgraded from 20% to 7.24%.
“We gave NNPCL 12 months to pay cash for the balance of their equity due to their inability to supply the agreed crude oil volume. The deadline expired on June 30, 2024, without payment. This resulted in a revision of their equity stake to 7.24%,” Chiejina stated.
Clarification on the Nature of NNPCL’s Investment
Contrary to NNPCL’s claims of providing essential support amid liquidity challenges, Dangote Refinery asserts that NNPCL’s $1bn investment was a standard business arrangement for equity participation.
“It is inaccurate to claim that NNPCL facilitated a $1bn investment amid liquidity challenges,” Chiejina said. “Like all business partners, NNPCL invested $1bn in the refinery to acquire an ownership stake of 7.24%, which benefits its commercial interests.”
Chiejina further highlighted the importance of presenting facts accurately, urging stakeholders to ensure media reports reflect the true nature of the partnership.
Dangote Refinery’s rebuttal of NNPCL’s claim has brought to light the complexities of their investment partnership. While NNPCL presented its $1bn crude-backed loan as a significant contribution, Dangote Refinery insists it was merely a small part of a much larger financial framework. The controversy highlights the importance of clear communication and transparency between major business stakeholders, especially in projects of national importance like the Dangote Refinery.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
