The Dangote Petroleum Refinery and Petrochemicals (DPRP) has denied that the Nigerian National Petroleum Company Limited (NNPCL) used a $1 billion loan secured by a crude forward sale agreement to fund the refinery during a liquidity crisis.
On Wednesday, Anthony Chiejina, the company’s Chief Branding and Communications Officer, said that the NNPCL’s stance was a misinterpretation of the facts.
“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.
Chiejina noted that the refinery’s decision to form a cooperation with the NNPCL was based on “their strategic position in the industry as the largest off-taker of Nigerian crude” and, at the time, the sole supplier of petrol to Nigeria.
“We agreed to sell a 20% stake for $2.76 billion.” We agreed that they would only pay $1 billion, with the remainder recovered over 5 years by deductions on crude oil supplied to us and profits owed to them,” Chiejina stated.
“If we were experiencing cash issues, we would not have granted them such generous payment conditions. The refinery was in the pre-commissioning stage when the agreement was signed in 2021.
According to the statement, the deal would have been cash-based rather than credit-driven if the refinery had liquidity concerns.
The refinery’s representative stated that the NNPCL was thereafter unable to supply the agreed-upon 300,000 barrels per day of crude.
He explained that the shortage occurred because the NNPPC “had committed a greater portion of their crude cargoes to financiers with the expectation of higher production, which they were unable to achieve.”
“We subsequently gave them 12 months to pay cash for the balance of their equity given their inability to supply the agreed crude oil volume,” added the representative.
“NNPCL failed to achieve this deadline, which passed on June 30th, 2024. As a result, their equity position was reduced to 7.24%. “Both parties have extensively covered these events,” he said.
