Why NNPC’s Borrowing To Acquire 20% Equity In Dangote Refinery – Mele Kyari

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The Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mele Kyari, on Tuesday, said it is purchasing a stake in Dangote oil refinery because it is a gigantic project which a resource-dependent nation like Nigeria should not miss out of.

According to him, purchasing a stake in the refinery is for both energy and fiscal security of the country.

The refinery is expected to begin production in 2022 with an installed 650,000 barrels per day capacity.

Read Also: Dangote Refinery to Sell Refined Crude to FG – Emefiele

It has been declared as a groundbreaking project for energy security in the country and for the African continent.

In May, the NNPC announced that it plans to acquire a 20 percent equity stake in the private company, led by billionaire Aliko Dangote.

“There is no resource-dependent country that will watch a business of this scale, which borders on energy security and has implications for fiscal security of the country, and you don’t have a say,’’ Kyari said in an interview on Channels Television breakfast programme, Sunrise Daily.

“For the Dangote refinery, we are not taking government money to buy it, which is the mistake that people are making.  We are borrowing on the back of the cash-flow of this business.

“We know that this business is viable, it will work and it will return dividends. It has a cash-flow that is sustainable because refinery business, in the short term, will continue to be sustainable.

“That’s why banks have come forward to lend to us, so we can take equity in this,” he stated.

“Dangote refinery will come into production by 2022. And what that will do is to deliver over 50 million litres of gasoline , to be specific, into our markets. We are also working on our refineries, to ensure that we fix them.

‘’We have awarded the contract for Port Harcourt refinery rehabilitation. And ultimately, we are going to close that of Warri and Kaduna very soon in July, so that all of them will work contemporaneously.

‘’The net effect is that you are going to have an environment where Nigeria becomes the hub of petroleum products and supply.

‘’It’s going to change the dynamics of petroleum supply globally in the sense that the flow is coming from Europe today and it is going to be reversed to some other direction. We will be the supplier for West Africa legitimately and also many other parts of the world.

“So the meaning of this is, there is an opportunity that has been thrown at us. And I’m not sure Mr Dangote wants to sell his equity in the refinery. I can confirm that it was at our instance that we started this engagement.

‘’He did not want to sell his shares in this refinery.  There is no resource-dependent country that will watch a business of this scale, which borders on energy security and has implications for fiscal security of the country, and you don’t have a say.

‘’For us, as a strategy, we started this process long before Dangote started his refinery project. We take equity in very significant businesses that are anchored on the oil and gas operations: fertiliser, methanol plants, modular refineries and some other businesses that we are dealing with.

“It is to expand our portfolio and because we are the national oil company, we have the responsibility to guarantee energy security for our country. And there is no way you can do that except you have a seat on the board of these institutions.

‘’That’s why anyone that is going to construct a refinery that is in the excess of 50,000 barrels per day, we will talk to them, take equity in it, as long as we have the money to pay for it.

“For the Dangote refinery, we are not taking government money to buy it, which is the mistake that people are making. We are borrowing on the back of the cash-flow of this business.

‘’We know that this business is viable, it will work and it will return dividends. It has a cash-flow that is sustainable because refinery business, in the short term, will continue to be sustainable.

‘’That’s why banks have come forward to lend to us, so we can take equity in this.  We are very proud that we did this. This is good for our shareholders, which includes all 200 Nigerians who will also be happily buying shares from this company if they had the opportunity. But now we have done on their behalf, so that ultimately the value will come to all of us.

“But there is no way you can watch a business of this magnitude, of this sensitivity, to run without the involvement of the national oil company. No country does this.”

Speaking further, Kyari said the inability to find an appropriate price for petrol had forced the continuation of the subsidy scheme.

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