NNPCL Reduces Stake In Dangote Refinery As It Repays 60% Of $1bn Loan

NNPCL Loan Repayment and Stake Reduction in Dangote Refinery

The Nigerian National Petroleum Company Limited (NNPCL) has repaid 60 percent of the $1.036 billion loan it secured in September 2021 for its investment in the Dangote Petroleum Refinery and Petrochemicals Free Zone Enterprise (DPRP FZE).

This loan was crucial for them to acquire a 20 percent stake in the refinery.

According to NNPCL’s financial report for the fiscal year ending December 31, 2023, the company has so far repaid $625 million of the loan, leaving a balance of $424 million.

The report stated, “By December 31, 2023, NNPCL has repaid $625 million of the principal loan, with $424 million still outstanding.”

NNPCL’s Strategic Decision

The $1.036 billion loan was arranged through a forward sale agreement with Lekki Refinery Funding Limited, carrying an interest rate of 3-month London InterBank Offered Rate (LIBOR) plus 6.125 percent.

As part of the agreement, they agreed to supply 35,000 barrels of crude oil per day as repayment for the loan.

However, the financial statement also revealed significant changes in NNPCL’s involvement with the Dangote Refinery. Initially, NNPCL Greenfield Limited, a subsidiary of NNPCL, managed the investment.

However, with the implementation of the Petroleum Industry Act (PIA), management responsibilities were transferred to NNPCL Downstream Investment Service (NDIS).

This restructuring led to a shift in payment arrangements for the remaining $1.76 billion, initially planned as a discount on crude oil prices but later agreed to be paid in cash.

Clarification on NNPCL’s Stake Reduction

As of December 2023, NNPCL holds a 7.25 percent interest in the DPRP FZE, a notable reduction from the original 20 percent stake. Aliko Dangote, in July 2024, publicly stated that NNPCL had lost its 20 percent stake due to missing the June payment deadline.

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In response, Femi Soneye, NNPCL’s chief corporate communications officer, clarified that the reduction in stake was a deliberate strategic decision.

“The decision to reduce our stake in the Dangote Refinery was communicated to Dangote months earlier and is part of our broader strategy,” Soneye explained. He emphasized that this was not due to a failure to meet obligations, as some reports suggested.

Future of NNPCL’s Investment in Dangote Refinery

NNPCL’s investment in the Dangote Refinery remains significant despite the reduced stake.

The company’s 2022 audited financial statement showed that they initially acquired the 20 percent stake for $2.76 billion, with $1 billion paid directly to Dangote Refinery and $36 million covering transaction fees.

The loan from Lekki Refinery Funding Limited played a crucial role in facilitating this acquisition.

Despite the reduction in equity, it continues to emphasize the strategic value of its investment in the refinery.

The ongoing repayment of the $1.036 billion loan, coupled with the restructured payment terms, underscores NNPCL’s commitment to fulfilling its financial obligations while adjusting its business strategy.

Conclusion

NNPCL’s journey with the Dangote Refinery illustrates the dynamic nature of business investments and the strategic decisions companies must make.

The repayment of 60 percent of the $1.036 billion loan marks a significant milestone for them. At the same time, the reduction of its stake in the refinery reflects broader strategic considerations.

The company’s future actions will continue to be closely watched as it navigates its role in Nigeria’s oil and gas industry.