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EITI Query: The Reasons For NNPC Ltd.’s 20% Interest In Dangote Refinery

By Adewole Kehinde

“Trust, honesty, humility, transparency, and accountability are the building blocks of a positive reputation. Trust is the foundation of any relationship.”Mike Paul

The global Extractive Industry Transparency Initiative (EITI) in Abuja on Tuesday raised concerns over the Nigerian National Petroleum Company (NNPC) Limited’s 20 per cent share in Dangote Petroleum Refinery, adding that many questions are left unanswered in other crude-backed loans.

There is no doubt that Dangote Group made a huge investment that was needed to jumpstart the industry and therefore needed the support of all parties, including the government.

So, the investment from NNPC Limited was to support the amount already committed by Dangote Group in the world’s largest single-train refinery.

In my opinion, the refinery is an expression of massive confidence in the oil and gas economy of Nigeria.

From my investigation, the NNPC Ltd.’s support for the refinery has increased investors’ confidence in the sector, thereby attracting more investments.

Those who are familiar with the oil and gas sector have agreed with me that it makes both commercial and nationalistic sense for NNPC Limited to have invested 20% equity in the Dangote Refinery.

Concerning the questions raised by the global Extractive Industry Transparency Initiative (EITI), I recall that Mallam Mele Kyari, who appeared before the House of Representatives Committee on Finance on Wednesday, August 25, 2021, at the interactive session on the Medium Term Expenditure Framework (MTEF) in Abuja, said the decision to buy the 20 per cent stake in the Dangote refinery was to ensure the plant buys crude from Nigeria.

He explained that the 20 per cent stake valued at $2.6 billion is tied to the refinery buying crude oil from Nigeria, adding that without the equity, the Dangote refinery could buy cheap crude from Venezuela and import it to the country.

The GCEO disclosed that the country had no strategic storage, and this equity stake would ensure that the country had a seat on the board of the company.

Kyari said, “Today, every country is struggling to secure a market for their crude oil. This refinery does not owe us any responsibility if we don’t have this arrangement. That is why we tied our participation to the fact that this refinery must buy from us.

“This refinery is very complex in our industry because it can crack any crude. So, it can buy any cheap crude from anywhere, bring it into this country, and leave you with your crude.

“We simply saw this opportunity, and we said we were not going to take any government money to put into it. We are borrowing money from the AfriExim consortium to pay for our initial payment, and we tied his subsequent payment to him buying from our production.”

“Our decision to take equity in the Dangote refinery was very calculated and conscious. First, there is no resource-dependent country like ours anywhere, and a national oil company will have a venture of this size and magnitude with its very clear security implications that is situated in a free trade zone. This refinery is not in this country.

“Today, we import 100 per cent of our refined products into this country. You now have a venture that will produce close to 50 million litres of petroleum products in this country, where energy security is an issue. From my knowledge, the U.S. keeps stock on the ground that the government owns it and that the government pays for it and keeps it.

“As we speak today, we don’t have any strategic storage or arrangements. So no country will allow any venture of this nature to exist without having a seat on its board.

“Secondly, this company is situated in the free trade zone. The meaning of this is that there are several incentives granted to this business. If you look at our total investment of about $2.7 billion, not $5 billion, the total stake of 20 per cent is $2.7 billion if you are to build 20 per cent of that capacity, which will be around 130 barrels per day in the refinery.

“It is simply impossible to build a refinery of that capacity with that amount of money. This is not just a refinery, but a refinery with a petrochemical component. So, somebody has done all the ‘jaki work’ (grunt work) for us, and we are taking a stake in it.”

“This is a very informed policy decision that will guarantee security because we will have a seat—we will have the right to 20 per cent of the production from this facility.”

I strongly stand with the 20 per cent equity share, as the Dangote Refinery has a good prospect of putting an end to fuel importation and the associated leakages of public funds while also preserving our foreign exchange reserves.

A positive step has been taken with NNPC Ltd.’s holding of the Dangote Refinery. Even if the private sector is pushing the Dangote refinery, it is a project of great and strategic national importance.

To me, NNPC Limited has locked down the ability to sell crude oil for a minimum of 33,000 barrels by right for the next 20 years to Dangote Refinery, which gives the company access to 20 per cent of the production from the Dangote plant.

The information Extractive Industry Transparency Initiative (EITI), needs is in the public domain.

The fact that NNPC joined the EITI supporting company in 2019 and joined the EITI’s state-owned enterprise (SOE) transparency network is no longer news. The intention behind the decision was to greatly increase the openness of the NNPC, which is often criticised for being unreliable and opaque.

Thus, rather than labelling it elusive, I think Alex Gordy, the Technical Director of EITI, could have gotten in touch with NNPC Limited to find out the specifics of the contracts.

 

Adewole Kehinde is a public affairs analyst and can be reached at 08166240846. E-mail: kennyadewole@gmail.com

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