The Dangote Refinery, one of Africa’s largest industrial projects, is poised to divest a 12.7% stake in 2024 to facilitate the servicing of a significant syndicated loan maturing in August 2024. This development was revealed in a recent report by Fitch Ratings, a leading global credit rating agency.
Fitch Ratings highlighted that the Nigerian National Petroleum Company Limited (NNPCL) had previously aimed to purchase a 20% stake in the refinery.
However, NNPCL’s decision not to exercise its option to acquire an additional 12.75% by June 2024 has raised concerns about the group’s ability to manage its loan obligations.
In 2021, NNPCL secured a 7.25% stake in the refinery for $1.0 billion, with an option to acquire the remaining 12.75% by June 2024.
This acquisition was part of a strategic move to bolster Nigeria’s refining capacity and reduce dependence on imported petroleum products. However, NNPCL has since retracted from this commitment.
Fitch’s report stated, “Since the option has not been exercised, the group plans to divest a 12.75% stake in the Dangote Oil Refining Company (DORC) in 2024. The group intends to service its significant syndicated loan maturing in August 2024 from the equity divestment. However, timely divestment and meeting the imminent maturity are highly uncertain in our view.”
This development comes amidst the backdrop of President Alhaji Aliko Dangote’s recent revelation that the NNPC only holds a 7.2% stake in the refinery, contrary to the widespread belief that it possesses a 20% stake.
Dangote clarified, “The agreement was actually 20% which we had with NNPC, and they did not pay the balance of the money up till last year; then we gave them another extension up till June (2024), and they said that they would remain where they have already paid, which is 7.2%. So NNPC owns only 7.2%, not 20%.”
NNPCL, in a subsequent statement, affirmed its decision not to further invest in the refinery. “NNPC Limited periodically assesses its investment portfolio to ensure alignment with the company’s strategic goals. The decision to cap its equity participation at the paid-up sum was made and communicated to Dangote Refinery several months ago,” said Olufemi Soneye, the spokesperson for NNPCL.
The decision by NNPCL to limit its stake has prompted calls for transparency and accountability.
Former Minister of Education, Oby Ezekwesili, has urged for an independent audit to investigate the reasons behind NNPCL’s decision.
She questioned, “Did the Nigerian government not tell us it borrowed $3.3 billion from Afreximbank to take a stake in the Dangote refinery?” Ezekwesili has called on President Bola Tinubu to launch an independent audit of the transaction to provide clarity to the public.
The Dangote Refinery, located in the Lekki Free Trade Zone in Lagos, Nigeria, is a $19 billion project with a capacity to refine 650,000 barrels of crude oil per day.
However, the refinery’s journey has not been without challenges. Financing the massive project required significant loans, and Dangote Industries Limited had to secure a syndicated loan from a consortium of local and international banks.
The need to service these loans has become increasingly pressing, leading to the decision to divest part of the equity in the refinery.
Fitch Ratings has expressed concerns about the timely divestment of the 12.7% stake and the ability to meet the upcoming loan maturity. The agency noted, “The group intends to service its significant syndicated loan maturing in August 2024 from the equity divestment. However, timely divestment and meeting the imminent maturity are highly uncertain in our view.”
