NNPC will go to financial markets to fund 20% equity holding in Dangote Refinery – Kyari

By Solomon Ezeme

The Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mallam Mele Kyari, on Tuesday stated that the Corporation was not going to depend on government’s resources to fund its proposed 20 percent equity holding on the Dangote refinery.

The Corporation, he said, will borrow the funds from the financial market based on its cash-flow.

Kyari, who spoke on Channels Television’s Sunrise Daily, monitored by our reporter, also assured that the country will soon overcome the challenges facing it in terms of cost of petroleum production in light of government’s as well as Dangote refinery’s commencing operations by 2022.

NNPC had earlier announced its plans to acquire a 20 percent equity stake in the 650,000 barrels per day (bpd) refinery owned by Africa’s richest man, Aliko Dangote.

Mallam Kyari noted that the decision to invest in the refinery still under construction was based on the assurance that it is a viable business, stressing that it has the prospects of generating returns in a short time.

He stated that those assuming that the corporation intends to use government’s fund on the investment initiative are making a mistake.

He hinted that part of the reasons for the decision to invest in the refinery is for government to have a say in its operations.

“No resource-dependent country 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,” he said.

Explaining the source of funding he said, “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 million Nigerians who will also be happily buying shares from this company if they had the opportunity. But now we have done it on their behalf, so that ultimately the value will come to all of us.

He added that it would have been unwise for the corporation not to participate in the initiative which he described as sensitive.

“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”, he said.

The NNPC boss further disclosed that the country will soon become the hub of refined petroleum products in the West Africa subregion as its total refining capacity hits 1,095,009 barrels per day by 2022.

“Dangote refinery will come into production by 2022. And what that will do is to deliver over 50 million litres of gasoline 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. 

He stated that “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.

He argued that the decision was also driven by the profit potential of the refinery business.

“It is to expand our portfolio and also 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 have a say, except you have a seat on the board of these institutions. And 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.

On Fuel subsidy, he noted that the inability to find an appropriate price for petrol has forced the continuation of the subsidy scheme.

The NNPC is currently the sole, official importer of petroleum products into the country.

He said the landing price of petroleum products is about N256 per litre, but sells for N162 to N165 in most parts of Lagos.

He stated that  “The reality is that we cannot afford it. But also the second reality is if you don’t do something smart, you could end up throwing prices at Nigerians that are well above prices that they should pay for.”

“The government is still engaging with organised labour and other stakeholders on how to properly price the product. The engagement is aimed at making sure there is a reasonable level of pricing that we can do that will recover the cost,” he said.

On fuel smuggling, he said “Petroleum consumption in Nigeria is not up to 60 million litres per day, but we supply up to that. We always plan with 60 million litres, because anytime we do below that, there is a crisis.”

He acknowledged that there “are sharp practices which we are trying to control and an organised cross-border smuggling of petroleum, which is associated with the price of petroleum itself.”

The smuggling, he noted, is exacerbated by the fact that Nigeria shares borders with countries who have no choice but to transport petroleum by road.

“If everything works well and consumption is limited to our country, we are dealing with about 42 million litres,” Mr Kyari said.

He acknowledged that there “are sharp practices which we are trying to control and an organised cross-border smuggling of petroleum, which is associated with the price of petroleum itself.”

The smuggling, he noted, is exacerbated by the fact that Nigeria shares borders with countries who have no choice but to transport petroleum by road.

“If everything works well and consumption is limited to our country, we are dealing with about 42 million litres,” Mr Kyari said.

Leave a Reply

Your email address will not be published. Required fields are marked *