Chisaa Okoye
Mele Kyari, the Group Managing Director of the Nigerian National Petroleum Corporation [NNPC] has said that the Corporation is borrowing to acquire 20 percent equity in the 650,000 barrels per day capacity Dangote Refinery because the business is viable and will return dividends.
The refinery is expected to be the Africa’s biggest oil refinery and the world’s biggest single-train facility, upon completion in 2022.
The NNPC had in May, announced that it plans to acquire a 20 percent equity stake in the company owned by business mogul and Africa’s richest man, Aliko Dangote.
Speaking on Channels Television’s Sunrise Daily on Tuesday, the GMD said given the viability of the refinery business, the corporation had to approach the banks for loans to enable it purchase 20per cent equity in the refinery business.
“We know that this business is viable, it will work and it will return dividends. It has a cash-flow that is sustainable because refinery business, in the short term, will continue to be sustainable. “That’s why banks have come forward to lend to us, so we can take equity in this.”
“There is no resource-dependent country that will watch a business of this scale, which borders on energy security and has implications for fiscal security of the country, and you don’t have a say,” Kyari said.
He clarified that NNPC is not taking government money to buy equity in the Dangote Refinery as widely reported, saying, “We are borrowing on the back of the cash-flow of this business”.
Shedding more light on the refinery deal, the GMD said:“Dangote refinery will come into production by 2022. And what that will do is to deliver over 50 million litres of gasoline into, to be specific, our markets. We are also working on our refineries, to ensure that we fix them. We have awarded the contract for Port Harcourt refinery rehabilitation. And ultimately we are going to close that of Warri and Kaduna very soon in July, so that all of them will work contemporaneously. The net effect is that you are going to have an environment where Nigeria becomes the hub of petroleum products and supply. It’s going to change the dynamics of petroleum supply globally in the sense that the flow is coming from Europe today and it is going to be reversed to some other direction. We will be the supplier for West Africa legitimately and also many other parts of the world.
“So the meaning of this is, there is an opportunity that has been thrown at us. And I’m not sure Mr Dangote wants to sell his equity in the refinery. I can confirm that it was at our instance that we started this engagement. He did not want to sell his shares in this refinery.
“There is no resource-dependent country that will watch a business of this scale, which has bordering on energy security and has implications for fiscal security of the country, and you don’t have a say. And for us, as a strategy, we started this process long before Dangote started his refinery project. We take equity in very significant businesses that are anchored on the oil and gas operations: fertiliser, methanol plants, modular refineries and some other businesses that we are dealing with.
“It is to expand our portfolio and also because we are the national oil company, we have the responsibility to guarantee energy security for our country. And there is no way you can have a say, except you have a seat on the board of these institutions. And that’s why anyone that is going to construct a refinery that is in the excess of 50,000 barrels per day, we will talk to them, take equity in it, as long as we have the money to pay for it.
“For the Dangote refinery, we are not taking government money to buy it, which is the mistake that people are making. We are borrowing on the back of the cash-flow of this business. We know that this business is viable, it will work and it will return dividends. It has a cash-flow that is sustainable because refinery business, in the short term, will continue to be sustainable. That’s why banks have come forward to lend to us, so we can take equity in this.
“We are very proud that we did this. This is good for our shareholders, which includes all 200 Nigerians who will also be happily buying shares from this company if they had the opportunity. But now we have done on their behalf, so that ultimately the value will come to all of us.
“But there is no way you can watch a business of this magnitude, of this sensitivity, to run without the involvement of the national oil company. No country does this.”
On fuel subsidy scheme, the GMD explained that the inability to arrive at an appropriate price for petrol has forced the the government to continue with the scheme.
The NNPC is currently the sole importer of petrol into the country.
The landing cost for petrol is about N256 per litre, while the pump price is between N162 to N165 depending on where it was purchased.
Channels Television reports that in March 2020, the federal government said it would allow market forces to dictate the pump price of petrol.
But after oil prices rose in the preceding months, the government decided not to adjust the price correspondingly under pressure from organised labour.
Kyari further added: “The reality is that we cannot afford it.
But also the second reality is if you don’t do something smart, you could end up throwing prices at Nigerians that are well above prices that they should pay for.”
The NNPC boss said the government is currently engaging with the organised labour and other stakeholders on how to properly price the product.
“The engagement is aimed at making sure there is a reasonable level of pricing that we can do that will recover the cost,” he said.
“Petroleum consumption in Nigeria is not up to 60 million litres per day, but we supply up to that. We always plan with 60 million litres, because anytime we do below that, there is a crisis.”
Kyari said a large chunk of petrol is smuggled to sister countries and sold at higher prices. He blamed the country’s porous borders for the organised cross-border smuggling of petroleum.
He noted that when the government shut Nigeria’s borders last year, petrol consumption fell to 52 to 53 million litres per day and fell to as low as 42 million litres in the wake of the COVID-19 lockdown in 2020.