NNPC Clears $625 Million of Dangote Refinery Loan, Reduces Stake to 7.2%

The Nigerian National Petroleum Company Limited (NNPCL) has made significant progress in repaying the $1.036 billion loan it secured in 2021 to fund its 20% stake in the Dangote Petroleum Refinery and Petrochemicals Free Zone Enterprise (DPRP FZE).

As of December 31, 2023, NNPCL has paid back $625 million of the loan, leaving a balance of $424 million.

This repayment milestone was revealed in NNPC’s audited financial statement for the fiscal year ending in 2023.

The loan, arranged through a forward sale agreement with Lekki Refinery Funding Limited, was part of the $2.76 billion NNPC paid for its 20% equity stake in the $19 billion Dangote Refinery project.

The loan carried an interest rate of the 3-month London InterBank Offered Rate (LIBOR) plus 6.125%.

NNPCL initially agreed to supply 35,000 barrels of crude oil per day to settle the loan, using oil as a form of payment.

This agreement, intended to be fulfilled over time, marked a significant financial commitment by the state-owned oil company in supporting the Dangote Refinery project.

Despite the progress in repaying the loan, NNPC’s stake in the Dangote Refinery has been reduced from 20% to 7.2%.

This reduction, which became public in July 2024, followed NNPC’s decision to renegotiate its equity participation in the refinery.

According to Aliko Dangote, the billionaire founder of the Dangote Group, NNPC failed to meet the payment deadline for the remaining balance of the deal, which was due in June 2024.

However, NNPC clarified its position, stating that the decision to reduce its stake was strategic, rather than a result of missed payments.

Femi Soneye, NNPC’s chief corporate communications officer, emphasized that this reduction had been planned and communicated to the Dangote Group months earlier.

He added that NNPC is still committed to the refinery’s success and is working to ensure Nigeria’s refining capacity meets domestic consumption needs.

Originally, NNPC’s investment was managed by its subsidiary, NNPC Greenfield Limited. However, after the restructuring brought about by the Petroleum Industry Act (PIA), the management responsibility shifted to NNPC Downstream Investment Service (NDIS).

Along with this restructuring came a change in the payment arrangement, moving from a proposed $2.5 per barrel discount on crude prices to a cash-based repayment system for the remaining balance of $1.76 billion.

The Dangote Refinery, one of the largest in the world, is seen as a crucial project for Nigeria, aiming to reduce the country’s dependence on imported refined petroleum products.

NNPC’s investment and ongoing participation in the refinery are part of broader efforts to secure Nigeria’s energy future and boost its refining capacity.

However, with the reduction in NNPC’s stake, the company’s role in the refinery’s operations may shift, even as it continues to honor its financial obligations.

NNPCL’s loan repayment progress is a testament to the company’s commitment to meeting its financial obligations while supporting a project that is pivotal to the country’s energy and economic sectors.

The state oil company’s reduced stake does not diminish its ongoing involvement in the refinery’s future, though it reflects evolving strategies in Nigeria’s complex oil and gas landscape.