Aliko Dangote, the CEO of Dangote Refinery, expressed his disappointment over the Nigerian National Petroleum Company’s (NNPC) decision to pull out of an initial agreement to acquire a 20% stake in the Dangote Refinery. During an interview with Bloomberg TV in the U.S., Dangote described the move as “a big mistake.”
The Deal Breakdown
Dangote explained that his company had structured a favourable agreement with NNPC, valued at approximately $2.79 billion. Under this deal, NNPC was expected to make payments in instalments, with the first portion of $1 billion already paid a year and a half ago. The remaining amount was to be split into two parts:
- Crude Supply Deduction: For every crude oil supplied to the refinery, $2 would be deducted until one-third of the outstanding balance was cleared.
- Profit Deduction: NNPC’s profit share would pay the other one-third.
However, NNPC later opted out of this arrangement, citing confusion over the deal’s structure. They proposed an alternative agreement, where they would pay cash instead of deductions. A new agreement was signed, giving NNPC a year to settle the remaining $1.8 billion, with a deadline set for June 2024.
When June arrived, NNPC informed Dangote Group that they had decided to retain only a 7.2% stake, backing out of the original 20% investment. As a result, the refinery is now majority-owned by Dangote Group, with NNPC holding only 7.2%.
Dangote’s Final Stance
Dangote firmly stated that there would be no further negotiations with NNPC. “There is no more negotiation with us. That agreement is finished. It’s dead. It’s completed,” he remarked, emphasizing that the deal is now closed.
Background on NNPC’s Stake
In 2021, NNPC’s Group Managing Director, Mele Kyari, justified the decision to invest in the Dangote Refinery, citing the profit potential and the need for Nigeria to have a say in a refinery of this magnitude, which is critical to the country’s energy and fiscal security.
However, NNPC’s ownership has been reduced to 7.2% due to the failure to settle the outstanding payments by June 2024, a decision that Dangote sees as a missed opportunity for the national oil company.
