Key Points
- The Nigerian National Petroleum Company (NNPC) Limited’s stake in Dangote Petroleum Refinery has dropped from 20% to 7.2%.
- The reduction is due to NNPC’s failure to pay the balance of their share, which was due in June 2023.
- NNPC initially acquired a 20% interest in the $20 billion Dangote refinery for $2.76 billion in September 2021.
Aliko Dangote, Africa’s richest man, has revealed that the Nigerian National Petroleum Company (NNPC) Limited now holds a 7.2% stake in the Dangote Petroleum Refinery, a significant drop from the 20% initially announced.
This drop, according to Dangote, was due to NNPC’s failure to pay the balance of their share, which was due in June 2023.
Also Read: Dangote Refinery to begin petrol supply in July, confirms Edwin
During a press briefing on Sunday, Dangote explained, “NNPC no longer owns a 20 per cent stake in the Dangote refinery. They were meant to pay their balance in June, but have yet to fulfil the obligations. Now, they only own a 7.2 per cent stake in the refinery.”
The NNPC had initially acquired a 20 per cent interest in the $20 billion Dangote refinery for $2.76 billion in September 2021. However, NNPC confirmed the adjustment in a statement on Sunday, clarifying that they periodically assess their 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 NNPC spokesman Olufemi Soneye.
Challenges and Strategic Decisions
Nigeria, the most populous country in Africa, has been grappling with severe energy challenges. The nation’s state-owned refineries are non-operational, forcing heavy reliance on imported refined petroleum products, primarily handled by the state-run NNPC.
The removal of fuel subsidies in May 2023 led to tripled petrol prices, exacerbating the financial strain on citizens who depend on petrol for their vehicles and generators due to the lack of stable electricity.
Despite these challenges, Dangote’s refinery commenced operations in December 2022 at its $20 billion facility in Lagos, initially processing 350,000 barrels a day. The refinery aims to reach its full capacity of 650,000 barrels per day by the end of the year. Currently, it supplies diesel and aviation fuel to local marketers, with petrol supply expected to commence in August 2024.
Supply Issues and Resolutions
Dangote had previously expressed frustration over securing Nigerian crude for his refinery. A Bloomberg report indicated that the refinery purchased about 24 million barrels of crude from the United States due to local supply issues. The NNPC’s commitment to Nigerian crude in a $3.3 billion oil-for-loan deal with Afreximbank further complicated local crude supply.
Also Read: NNPC seeks industry collaboration to boost crude oil production, declares state of emergency
However, Dangote announced on Sunday that the refinery had resolved its crude oil supply issues with the NNPC and the Federal Government. As a result, the refinery is set to start rolling out petrol from August 2024.
Future Prospects
Nigeria’s crude oil production rose to 1.276 million barrels per day (bpd) in June 2023, still below the 1.7 million bpd benchmark set in the 2024 Budget. Despite these production challenges, the Dangote refinery’s operations and the reduced stake of NNPC reflect ongoing strategic adjustments and efforts to stabilise and enhance Nigeria’s energy sector.
The reduction of NNPC’s stake from 20 per cent to 7.2 per cent underscores the complexities and financial dynamics within Nigeria’s energy industry, highlighting the critical need for efficient financial management and strategic planning in large-scale industrial investments.
