Aliko Dangote, Dangote Refinery’s Chief Executive Officer (CEO), announced that the Nigerian National Petroleum Corporation (NNPC) Limited no longer holds a 20% stake in the refinery. During a press briefing at the refinery on Sunday, Dangote disclosed that NNPC’s stake had been reduced to 7.2% due to their inability to pay the balance of their share, which was due in June.
Dangote explained that they still need to meet their financial obligations despite NNPC’s commitment to providing the necessary funds. “NNPC no longer owns a 20% stake in the Dangote Refinery. They were supposed to pay their balance in June but have not fulfilled their obligations. Now, they only own a 7.2% stake in the refinery,” Dangote said.
Background
In March 2021, Nairametrics reported that NNPC planned to raise $2.76 billion in credit facilities to purchase a 20% stake in the Dangote Refinery. The NNPC Chief Operating Officer, Refining and Petrochemicals, Mustapha Yakubu, stated that this move aimed to secure Nigeria’s involvement in the significant project, ensuring the country remains resource-dependent.
Yakubu highlighted that this was part of the government’s strategy to collaborate with private oil companies to safeguard the nation’s energy security while also planning to rehabilitate its refineries. According to recent data from NNPC Ltd’s newly released audited financial report for 2022, the national oil company borrowed $1.3 billion to acquire the stake.
However, Dangote revealed that NNPC has only paid enough to secure a 7.2% stake in the refinery and failed to meet the financial obligations due last month.
The Dangote Refinery Project
The Dangote Refinery is an ambitious oil project in the Lekki Free Zone, Lagos, Nigeria. With a capacity of 650,000 barrels per day (BPD), it aims to be Africa’s largest oil refinery and the world’s most extensive single-train facility. The project, valued at $19 billion, is expected to transform Nigeria’s economy and the broader African continent.
The refinery is anticipated to generate 9,500 direct and 25,000 indirect jobs, significantly boosting the region’s economic activity. Once fully operational, it will produce approximately 50 million liters of petrol and 15 million liters of diesel daily, translating to 10.4 million tonnes of petroleum products annually.
Moreover, the refinery will yield 4.6 million tonnes of diesel and 4 million tonnes of jet fuel annually. Additionally, the facility includes a fertilizer plant that will use by-products from the refinery as raw materials, further enhancing its economic and environmental impact.
The Impact of the Stake Reduction
Reducing NNPC’s stake in the Dangote Refinery could have significant implications for Nigeria’s energy sector. With a smaller share, NNPC’s influence and control over the refinery’s operations and strategic decisions may be diminished. This change might affect the national oil company’s ability to leverage the refinery for broader national economic and energy security goals.
However, the move could also present opportunities for increased efficiency and innovation within the refinery. As a predominantly privately owned entity, the Dangote Refinery might benefit from more agile decision-making processes and a stronger focus on profitability and sustainability.
Future Prospects
The Dangote Refinery’s success is critical for Nigeria, which relies heavily on imported refined petroleum products despite being a major crude oil producer. The refinery’s ability to meet domestic demand and export refined products could drastically reduce Nigeria’s fuel import bill, improve trade balance, and strengthen the naira.
Furthermore, the project aligns with Nigeria’s broader economic diversification goals. By developing a robust refining sector, Nigeria can create value-added products, generate employment, and stimulate related industries, such as petrochemicals and fertilizers.
The reduction of NNPC’s stake in the Dangote Refinery to 7.2% marks a significant development in Nigeria’s energy sector. While it underscores the challenges faced by NNPC in meeting its financial commitments, it also highlights the potential for increased efficiency and innovation within the refinery. As the Dangote Refinery moves closer to total operational capacity, its success will be pivotal in transforming Nigeria’s energy landscape, enhancing economic growth, and ensuring energy security for the nation.