The Dangote Petroleum Refinery and Petrochemicals (DPRP) has denied the claims by the Nigerian National Petroleum Company Limited (NNPCL) it used a $1 billion loan secured through a crude forward sale agreement to support the refinery during its liquidity challenges.
“We would like to clarify that this is a misrepresentation of the situation as $1bn is just about 5% of the investment that went into building the Dangote Refinery,” Chiejina said.
He stated that the refinery’s partnership with the NNPCL was based on the recognition of “their strategic position in the industry as the largest offtaker of Nigerian crude” and at the time, the sole supplier of petrol into Nigeria.
He clarified: “We agreed on the sale of a 20% stake at a value of $2.76 billion. Of this, we agreed that they will only pay $1 billion while the balance will be recovered over a period of 5 years through deductions on crude oil that they supply to us and from dividends due to them.
“If we were struggling with liquidity challenges we wouldn’t have given them such generous payment terms. As at 2021 when the agreement was signed, the refinery was at the pre-commission stage.”
Chiejina further explained that the agreement would have been cash-based rather than credit-driven if the refinery struggled with liquidity issues.
He noted that the NNPCL was subsequently unable to supply the agreed 300,000 barrels a day of crude (bpd).
According to him, the shortfall was because the NNPPC “had committed a greater part of their crude cargoes to financiers with the expectation of higher production which they were unable to achieve”.
“We subsequently gave them a 12-month period for them to pay cash for the balance of their equity given their inability to supply the agreed crude oil volume,” he said.
“NNPCL failed to meet this deadline which expired on June 30th 2024. As a result, their equity share was revised down to 7.24%. These events have been widely reported by both parties,” he stressed.