- The NNPC will now have to supply crude oil to the Dangote refinery or lose its stake in Africa’s biggest refinery
- Nigeria’s government, through the NNPC, owns a 20% equity stake in the refinery, equivalent to $2.7 billion
- Only $1 billion, which guarantees only 7% of the equity in the giant refinery, has been paid in cash by the Nigerian government
Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market
Nigeria is at the risk of losing a significant part of its equity in the Dangote refinery.
According to a source at the ministry of petroleum resources in Abuja, this is because it failed to meet its obligations under which the equity acquisition was agreed.
Dangote Refinery continues to await NNPC for crude oil supply
Recall that the 650,000 barrels-a-day Dangote refinery was commissioned in May. Since then, the refinery has continued to wait on the supply of crude oil.
Earlier, Legit.ng reported that the NNPCL shunned Dangote Refinery to swap crude oil for loans with several entities.
According to BusinessDay report, the NNPC must now meet its crude supply obligation.
The report said will Nigeria lose part of its equity in Africa’s largest refinery it fails to fulfil its obligation.
Nigeria’s equity worth $2.7 billion
Nigeria's government equity in the refinery cost a total of $2.7 billion, equivalent to 20%. An agreement of cash payment in part and crude oil supply was reached by both parties.
As part of payment for the 20% equity in the refinery, only $1 billion has been paid in cash by the Nigerian government. The amount paid only guarantees seven percent of the equity in the giant refinery.
In addition to the $1 billion payment, the NNPC, according to the agreement reached, was supposed to supply crude oil with $1 billion to the refinery once it was completed.
The balance of $700 million was supposed to be paid through earned dividends from the operations of the plant.
BusinessDay, however, reported that in its desperation to sell $1 billion worth of crude oil to the Dangote plant, the NNPC is attempting to extract crude oil from domestic producers.
This, however, raised concerns among stakeholders who feel the strategy could further driving investors from the industry.
Financial analysts have opined that the emergence of Dangote's refinery will change the narrative in the indutsry.
Samuel Oyekanmi, a financial analyst said,
"The full implementation of Dangote Refinery is a potential growth propeller, however it will take time before we start seeing the full impact on the economy."
Legit.ng had reported that Dangote Refinery will receive crude oil from NNPC by December. The refinery is expected to receive six cargoes for a test run.
In an earlier report, analysts tracking the refinery’s development said Dangote Refinery is still several months from full-scale production of fuels including high-quality gasoline.
As reported by Bloomberg, the full ramp-up of Africa’s largest oil refinery is still a long way to go.
Why Dangote Refinery is delaying production as five modular refineries take-off
Meanwhile, Legit.ng reported that the failure to supply crude oil to domestic refineries, including the Dangote Refinery, delayed production.
The development comes as the Dangote Refinery failed to meet its October production deadline.
Industry observers said the failure of the refinery take-off has dashed the hopes of Nigeria, who expected the project to end petrol imports.