The Nigerian National Petroleum Company Limited (NNPCL) has successfully repaid 60% of a $1.036 billion loan obtained in September 2021 to fund the purchase of a 20% share in the Dangote Petroleum Refinery and Petrochemicals Free Zone Enterprise (DPRP FZE).
As of December 31, 2023, NNPC had repaid $625 million of the principle amount, leaving a balance of $424 million on the primary debt.
The source of this loan and the terms of repayment are detailed in the NNPCL’s financial statement for the fiscal year ending December 31, 2023, under the part labeled “Financing of investment in Dangote Refinery.”
Only 7.25% of the stake acquired
The loan was secured through a forward sale agreement with Lekki Refinery Funding Limited, with an interest rate of 3-month LIBOR plus 6.125%.
A part of the financial statement read: “In September 2021, NNPC entered into a forward sale agreement with Lekki Refinery Funding Limited to supply 35,000 bbl. of crude oil per day for the settlement of the $1.036 billion (N426.2 billion) funding received for the financing of investment in Dangote Refinery.
“The interest rate for the facility is 3-month LIBOR plus 6.125%. As of December 31, 2023, NNPC limited has paid $625 million principal, while $424 million (N324 billion) is still outstanding.”
Initially, this investment was managed by NNPC Greenfield Limited, a special-purpose vehicle wholly owned by NNPC.
However, following the restructuring of NNPC under the Petroleum Industry Act (PIA), the management of this investment was transferred to NNPC Downstream Investment Service (NDIS).
The restructuring also led to a significant change in the payment structure. The balance of the cost of equity investments, amounting to $1.76 billion, was agreed to be paid in cash instead of the originally proposed crude oil discount of $2.5 per barrel on the official selling price of crude oil. As of December 31, 2023, NNPC Limited holds a 7.25% interest in DPRP FZE.
What you should know
The Dangote Refinery is a massive oil project located in the Lekki Free Zone, Lagos, Nigeria, boasting a capacity of 650,000 barrels per day (BPD). Owned by the Dangote Group, it aims to become Africa’s largest oil refinery and the world’s biggest single-train facility.
Earlier this year, Nairametrics reported that the 2022 audited financial statement of NNPC contained information which showed that it had acquired a 20% stake in the Dangote refinery for $2.76 billion through a $1.036 billion funding from Lekki Refinery Funding Limited, of which $1 billion was paid to Dangote Refinery and $36 million was for transaction costs.
Aliko Dangote mentioned to newsmen that NNPC no longer holds a 20% stake in the refinery. He explained that this change occurred because NNPCL failed to pay the balance of their share, which was due in June. The NNPCL responded, explaining why it holds only 7.2% equity in the $19 billion Dangote Refinery instead of the widely speculated 20%.
In a statement, Femi Soneye, the Chief Corporate Communications Officer of NNPC, addressed the company’s recent decision regarding its investment in the Dangote Refinery. Soneye said that the decision to reduce their investment was carefully considered and communicated several months ago to Aliko Dangote.
