The Nigerian National Petroleum Company Limited (NNPCL) has made significant progress in repaying a $1.036 billion loan secured in September 2021 to fund the acquisition of a 20% stake in the Dangote Petroleum Refinery and Petrochemicals Free Zone Enterprise (DPRP FZE). As of December 31, 2023, NNPCL has repaid $625 million, leaving a balance of $424 million.
The details of this repayment were revealed in NNPCL’s financial statement for the year ending December 31, 2023, under the section “Financing of Investment in Dangote Refinery.” The loan was obtained through a forward sale agreement with Lekki Refinery Funding Limited, carrying an interest rate of 3-month LIBOR plus 6.125%. The agreement required NNPCL to supply 35,000 barrels of crude oil per day to settle the loan.
Initially, the investment was managed by NNPC Greenfield Limited, a wholly owned subsidiary of NNPCL. However, following the restructuring mandated by the Petroleum Industry Act (PIA), the management was transferred to NNPC Downstream Investment Service (NDIS). The restructuring also altered the payment structure, shifting from an initial plan to offer a crude oil discount to a cash payment requirement for the balance of the equity investment, which was agreed to be $1.76 billion.
As of the end of 2023, NNPCL holds a 7.25% interest in the Dangote Refinery, a significant reduction from the initially intended 20%. This change occurred because NNPCL did not complete the payment for the full 20% stake by the June deadline, as confirmed by Aliko Dangote, the owner of the refinery.
The Dangote Refinery, located in the Lekki Free Zone, Lagos, is set to become Africa’s largest oil refinery and the world’s largest single-train facility, with a capacity of 650,000 barrels per day. NNPCL’s investment in this project is part of its broader strategy to bolster Nigeria’s refining capacity and reduce reliance on imported petroleum products.
NNPCL’s decision to reduce its stake in the refinery was described as a deliberate and strategic move, according to Femi Soneye, the Chief Corporate Communications Officer of NNPCL. The decision was communicated to Dangote several months before the deadline for the equity payment.
This development underscores NNPCL’s ongoing efforts to manage its financial obligations while participating in one of Nigeria’s most critical energy projects. As the company continues to navigate the complex landscape of the global oil market, its involvement in the Dangote Refinery remains a key part of its strategy to enhance Nigeria’s energy security and economic stability.
