Dangote Refinery has clarified why the Nigerian National Petroleum Corporation Limited (NNPCL)’s ownership stake in the refinery was reduced from 20% to 7.24%.
The refinery explained that this decision came after NNPCL failed to meet critical terms of their partnership, particularly in supplying the agreed amount of crude oil.
Anthony Chiejina, the Group Chief Branding and Communications Officer of Dangote Refinery, issued a statement on Wednesday, providing important details about the issue.
According to the statement, the initial $1 billion investment by NNPCL was not a loan to support Dangote Refinery during financial challenges, as previously claimed. Instead, it was part of the investment NNPCL made to acquire a 20% stake in the refinery.
“The $1 billion was part of an investment to acquire a 20% ownership stake, not a loan to address financial difficulties,” Chiejina emphasized.
The statement revealed that the total value of the partnership between NNPCL and Dangote Refinery was $2.76 billion. NNPCL contributed $1 billion upfront, with the remaining balance meant to be covered over five years through crude oil supply and dividends.
However, NNPCL failed to fulfill a key commitment in the agreement: supplying 300,000 barrels of crude oil per day. This shortfall directly led to the reduction in NNPCL’s stake.
NNPCL’s Failure to Meet Supply Agreement
The partnership agreement between Dangote Refinery and NNPCL was based on NNPCL’s promise to supply a large volume of crude oil daily. This supply was essential for Dangote Refinery to operate smoothly.
NNPCL, however, struggled to meet this commitment. According to Dangote Refinery, NNPCL had allocated much of its crude oil cargoes to other financiers, expecting higher production levels that they were unable to achieve.
As a result, Dangote Refinery gave NNPCL a 12-month extension to pay for the remaining balance of its equity. This extended period expired on June 30, 2024, but NNPCL still did not meet its financial obligations.
“The inability of NNPCL to fulfill their crude oil supply commitment led to the revision of their stake,” the refinery explained. The ownership stake was revised from 20% to 7.24% as a result of the unmet terms.
Refinery Responds to Misrepresentation Claims
Dangote Refinery responded directly to NNPCL’s claim that a $1 billion loan had been crucial in helping the refinery during liquidity problems. The refinery made it clear that this claim was a misrepresentation of the facts.
“We would like to clarify that this is a misrepresentation of the situation as $1 billion is just about 5% of the investment that went into building the Dangote Refinery,” the statement reads.
The refinery also addressed the notion that it was struggling financially when the agreement was signed. Dangote Refinery made it clear that if they were facing liquidity challenges, the agreement with NNPCL would have been a cash-based deal instead of a credit-driven one.
“At the time the agreement was signed in 2021, the refinery was in the pre-commissioning stage. If we were struggling with liquidity, we wouldn’t have given them such generous payment terms,” the statement further explained.
NNPCL Still Valued as a Partner
Despite the challenges and adjustments to NNPCL’s stake, Dangote Refinery reaffirmed that NNPCL remains a valuable partner.
“We want to make it clear that NNPCL remains our valued partner in progress,” the statement emphasized.
The refinery urged stakeholders and the media to present the facts accurately and to avoid spreading misleading information about the situation.
“It is important for all stakeholders to adhere to the facts and present the narrative in the correct context. This will guide the media in reporting accurately for the benefit of our stakeholders and the public,” Dangote Refinery concluded.
Looking Ahead: The Future of the Partnership
While the reduction in NNPCL’s stake has caused some controversy, both parties continue to maintain their relationship. Dangote Refinery’s statement reassured stakeholders that despite the difficulties, NNPCL still has a significant role to play in the refinery’s future.
For now, it appears that both Dangote Refinery and NNPCL will continue their business relationship, albeit with adjusted terms. The full impact of the revised stake on NNPCL’s involvement in the refinery’s operations will become clearer as both sides move forward.
