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A Third NNPC Equity Stake in Dangote Refinery To Be Paid In cash

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Dangote refinery

Africa’s richest man and the President of the Dangote Group, Alhaji Aliko Dangote, yesterday disclosed that the 20 percent equity taken by the Nigerian National Petroleum Corporation (NNPC) in his much-awaited refinery will not be paid in a single cash transaction.

Speaking during a documentary aired on Arise News Channel, the renowned philanthropist noted that while a third of the $2.7 billion deal would be paid in cash, the second would be through crude sales and the third would be through profits made by the corporation.

He noted that there’s a lot of misconceptions around the planned 20 percent equity holding by the national oil company, explaining that the deal also involves all the products to be churned out by the $19 billion facilities, including petrochemicals.

Revealing that he got the inspiration to build the refinery from India, given what he described as the painful situation whereby Nigeria, a country of over 200 million people importing all petroleum products needed for consumption.

He pointed out that the project currently employs 29,000 Nigerians and 11, 000 foreigners with plans to ramp up the number to 57,000 in the coming months.

The 650,000 barrels per day refinery, located in Lagos is expected to start operation in the first half of next year, with the NNPC in the process of buying 20 percent of the refinery.

Stressing that the refinery is capable of meeting the country’s entire petrol, diesel and jet fuel needs, Dangote posited that as it stands, the country expends about 25 percent of all its import bills on bringing in petrol products into the country.

The businessmen lamented that Nigeria lost between $50 billion to $60 in investments to the delayed passage of the Petroleum Industry Act (PIA), but explained that with the recent presidential assent, investors who had been sitting on the fence are now expected to move into the country.

“So, these are the things that people don’t really understand and I want to really clarify it. When they talk about the $2.7 billion, you know, they (NNPC) are paying one third of the money.

“Another one-third of the money, again, will actually be paid through supply of crude, with the deduction of maximum of about $2 and some cents. And then one-third of it, which is another $850 to $900 million will be paid from the profit they are going to make from the business.

“So it’s not a cash transaction where they are paying all cash. You can see that if we don’t have confidence in what we are doing, we would have asked them to pay all cash,” he stated.

Dangote mentioned that one of the benefits of the refinery to Nigeria would be to stabilize the country’s currency because as of today, about 25 percent of the country’s foreign exchange goes to the importation of petroleum products.

He noted that if the country was to spend $8 billion to $9 billion for imports, for instance, that money would be saved because the refinery has the full capacity to meet every energy need of the country, whether petrol, diesel, or aviation fuel, with a lot left to export, thereby generating a lot of foreign exchange for the country.

“So you can see the difference, even our own balance of trade will change, it will strengthen also the naira because we’re not going to have this massive avalanche of dollars going out for importing finished products of our own raw material.

“This refinery that we built is very important and is going to help transform not only the oil sector in Nigeria, no, but it will also transform the entire economy of Nigeria, it will put millions of people directly or indirectly at work.

“This will massively transform the economy and by transforming the economy, the government will have more money to devote in terms of education, in terms of health and in terms of infrastructure,” he opined.

Dangote added: “It makes me feel terrible to see a country as big as Nigeria, as resourceful as Nigeria and with this sort of population that we have 200 million-plus, we’re importing all our petroleum products. I mean, it is very painful.

“So with that, I thought in my mind, and I said that somebody has to address this issue. We tried before, in 2007 like what I said earlier on, but the government of that day changed their minds, and then we jettisoned the idea and returned them.

“But right now, we came back with the support of the government to make sure that yes, we help in addressing this issue of not only Nigeria. Because I’m a Nigerian and I’ve benefited quite a lot from Nigeria and if there are issues to be sorted out, I should be one of those who will bring solutions to our national problems.”

According to Dangote, the refinery project remains the biggest in Africa today and one of the biggest in the world, adding that a lot of Nigerians were getting massive training as a way to build in-country capacity.

With the expected operationalization of the Petroleum Industry Act (PIA), Dangote expressed confidence that investors would be attracted to the country because before now, there was no incentive.

“Before there was no clarity, people were not really very ready and willing to put in their money. If you look at it, in the last couple of years, there has not been an investment. We have lost more than $50 billion to $60 billion worth of investment,” he noted.

On reasons for accepting NNPC’s 20 percent equity, he explained that it wasn’t possible for the government to sit back when a massive project like the refinery is ongoing because of the need for energy security, assuring that in three or maximum of four years, NNPC will recoup its investment.

“People keep talking about the refinery, they didn’t buy only the refinery, they bought refinery with petrochemicals. I could have actually decided to do like some of my mates here in Nigeria and just keep my money in the bank or keep the money abroad.

“But you know I’m very, very passionate about Nigeria and making Nigeria great. If it’s just the Dangote group making money, I would have just kept that money and participate in capital markets abroad where my money is in dollars and I am making money, but no.

“We know as a country we have challenges, how do we address these issues. The only way for me is not to sit and be criticizing, no, I should be part of the problem solvers and part of the change. My prayer is that I will give most of my wealth when I am alive,” he said.

Also, the Governor of the Central Bank of Nigeria (CBN) Mr. Godwin Emefiele, who spoke in the documentary explained that with the coming of the refinery, Nigeria would save a lot of its foreign exchange that’s currently being used in importing refined products.

He said: “Ordinarily, setting up a 650, 000 barrels per day refinery, is usually a project that is set up by sovereign countries, not by individuals, no matter how big you are, no matter how big the company is.

“Our own selfish interest is that this will help to achieve our import substitution objectives and on this, you’re talking about goods that are currently being imported into the country with scarce foreign exchange, that we will now begin to produce them locally, thereby saving foreign exchange that the central bank would have spent importing or funding the importation of these items.

“At every opportunity that I have visited that project site, I get encouraged and I seize the opportunity of those visits to encourage even other Nigerians or other businesses, whether local or foreign, that Nigeria has a lot of potentials and as long as people can contemplate this kind of projects, they will receive the needed support from the CBN for the importation of plants and equipment.”

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Nigeria’s Rig Count Surges by 23% in February 2024

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Oil

In February 2024, Nigeria’s oil and gas exploration activities surged with rig count increasing by 23% compared to the previous year.

The rig count, a crucial index measuring upstream activities, climbed to 16 rigs from the 11 rigs recorded during the same period in 2023.

This leap in exploration activities comes as a positive development for Nigeria’s oil and gas sector, indicating growing momentum and investor confidence in the industry.

Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), attributed this sustained surge to the positive impact of the recently enacted Petroleum Industry Act (PIA).

The PIA, with its provisions for institutional governance, efficient administration, and attractive fiscal regimes, has created a conducive environment for investment and operations in the country’s oil and gas sector.

Despite the remarkable increase in exploration activities, Nigeria’s crude oil production for the month declined to 1.32 million barrels per day (mbpd), compared to January’s output of 1.46 mbpd.

This decrease highlights the challenges faced by the Nigerian oil industry, including infrastructure constraints, security issues in oil-producing regions, and operational disruptions.

To further enhance exploration efforts, Komolafe announced a strategic partnership with TGS-Petrodata to acquire approximately 56,000 square kilometers of 3D Seismic Gravity data, focusing on the Niger Delta deep and Ultra Deep Offshore regions.

This initiative aims to mitigate risks associated with exploration in challenging environments, with investors financing the project and resulting revenues to be shared between the government and TGS.

Looking ahead, Komolafe expressed optimism about sustained growth in oil exploration activities throughout 2024, with plans for an upcoming oil licensing round, a critical step in implementing the nation’s PIA and driving further advancements in the oil and gas sector.

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NNPC Faces Mounting Subsidy Burden as Oil Prices Skyrocket

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Petrol - Investors King

The Nigerian National Petroleum Corporation (NNPC) is facing an increasingly daunting subsidy burden as oil prices continue to surge.

Investigation has revealed that escalating crude oil prices pose a significant challenge to Africa’s largest oil producer, placing immense pressure on the government’s finances and the state-owned NNPC.

Brent, the benchmark for Nigeria’s crude oil, has skyrocketed from an average of $77 in January to as high as $86 per barrel.

While this surge in oil prices could potentially boost funding for Nigeria’s 2024 budget, which is anchored on a benchmark of $77.96 per barrel, the country’s inability to meet production quotas hampers its capacity to capitalize on the revenue influx from oil sales.

One of the primary consequences of soaring oil prices is the ballooning petrol subsidy burden borne by the NNPC.

Despite the government’s imposition of a cap on petrol retail prices, the widening gap between the landing cost and the pump price necessitates substantial subsidies to sustain consumer affordability.

Charles Akinbobola, a Lagos-based energy analyst, elucidated that the combination of a higher exchange rate, elevated oil prices, and static petrol retail prices compounds the subsidy dilemma for Nigeria.

With the country’s limited refining capacity mandating the importation of all petroleum products, the subsidy burden further intensifies, straining NNPC’s resources.

The opacity surrounding the subsidy program, coupled with reports of NNPC’s utilization of Nigeria LNG dividends to fund petrol subsidies, raises concerns about transparency and accountability.

Faith Akinnagbe, an energy lawyer, emphasizes the urgency of disclosing NNPC’s subsidy expenditures to ensure public accountability and oversight.

As Nigeria grapples with the repercussions of surging oil prices, the NNPC faces an uphill battle in managing its burgeoning subsidy obligations amidst fiscal constraints and economic uncertainties.

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