Dangote Offers to Sell Refinery to NNPC Following Attacks by Nigerian Government

In a surprising development, Aliko Dangote, Africa’s wealthiest man, has announced his willingness to sell his multibillion-dollar oil refinery to the state-owned Nigerian National Petroleum Company (NNPC) Limited. This offer comes amidst escalating tensions with the NNPCL, one of the key equity partners in the refinery, and ongoing disputes with Nigerian regulatory authorities.

Economists and stakeholders fear that this conflict, which escalated on July 18, after NMDPRA accused Dangote of being monopolistic, could have detrimental effects on Nigeria’s economy.

“Let them (NNPCL) buy me out and run the refinery the best way they can. They have labelled me a monopolist. That’s an incorrect and unfair allegation, but it’s OK. If they buy me out, at least, their so-called monopolist would be out of the way,” Dangote told PREMIUM TIMES in an exclusive interview on Sunday.

“We have been facing fuel crisis since the 70s. This refinery can help in resolving the problem but it does appear some people are uncomfortable that I am in the picture. So I am ready to let go, let the NNPC buy me out, run the refinery.”

Dangote’s announcement comes on the heels of his decision to halt plans to enter Nigeria’s steel industry to avoid monopoly accusations.

Background of the Dispute

Last month, Devakumar Edwin, Vice President of Oil and Gas at Dangote Group, accused the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) of allowing the import of substandard fuel into the country. This led to a strong rebuttal from NMDPRA’s Chief, Farouk Ahmed, who alleged that diesel from Dangote’s refinery and others had high sulfur levels, rendering it inferior to imported fuel.

“The AGO quality in terms of sulphur is the lowest as far as West Africa’s requirement of 50 parts per million (ppm). Dangote refinery, as well as some major refineries like Waltersmith refinery, produce between 650 ppm to 1,200 ppm. So, in terms of quality, their quality is much more inferior to the imported quality,” Ahmed claimed.

In response to the allegation, Dangote conducted a test during a tour of his refinery and fertilizer complex by House of Representatives members, including Speaker Tajudeen Abbas. Laboratory tests of Automotive Gas Oil (diesel) samples collected during the visit revealed that Dangote’s diesel had a sulfur content of 87.6 ppm, significantly lower than the 1800 ppm and 2000 ppm found in the other two samples.

“The Chairman of the House Committee on Downstream, Ikenga Ugochinyere, and Chairman of the House Committee on Midstream, Okojie Odianosen, oversaw the collection of samples from the Mild Hydro Cracking (MHC) unit of Dangote refinery for testing of all the samples,” a statement from Dangote Refinery noted.

This debunked Farouk Ahmed’s allegations, which many Nigerians saw as an attempt to undermine local production in favor of imports.

Dangote said his efforts to get the refinery fully operational are based on his commitment to national interest, not personal gain.

“As you probably know, I am 67 years old, in less than three years, I will be 70. I need very little to live the rest of my life. I can’t take the refinery or any other property or asset to my grave. Everything I do is in the interest of my country,” he said.

Dangote Refinery: The Hope of A Nation

Dangote’s 650,000 barrel-per-day refinery, which became operational last year after a decade of construction, represents a significant $19 billion investment. This figure is more than double the initial estimate, underscoring the plant’s scale and ambition.

The refinery was intended to help Nigeria, Africa’s largest oil producer, reduce its dependence on imported fuel, potentially saving up to 30% of the country’s foreign exchange expenditure on imports.

While the refinery was hailed as a transformative project, capable of alleviating Nigeria’s chronic fuel shortages, recent developments suggest that there is more to the delays in its production than meets the eye.

Set to release its first batch of petrol to the Nigerian market in August, the refinery has been operating at just over half its capacity since January. Challenges in securing crude supplies from international producers have compounded the situation, with companies either demanding exorbitant premiums or citing unavailability of the product, according to Edwin.

The NNPCL, initially a supportive partner, has become part of the conflict. According to S&P Global Platts, NNPCL delivered only 6.9 million barrels of oil to the refinery as of May, despite a pre-existing supply agreement and a 20% equity participation deal, of which only 7.2% has been fully paid.

This insufficient feedstock has forced Dangote Refinery to seek alternative sources, including Brazil and the US, to bridge the supply gap.

Economic Concerns

Economists and stakeholders are increasingly worried that this dispute could negatively impact Nigeria’s economy. The refinery was expected to create thousands of jobs and stimulate local industries. It was also seen as a pivotal project to enhance Nigeria’s industrial capacity and reduce import dependence, with the belief that any disruptions or changes in its operations could have far-reaching consequences for the economy.

However, there is a growing belief that the escalating spat between Dangote and the federal government is being buoyed by vested interests in President Bola Tinubu’s inner circle, with many claiming that the imminent production of the Port Harcourt’s refinery plays a role. The Port Harcourt’s refinery is billed to commence operation in August, according to the NNPCL head, Mele Kyari.

With the frustration of running the refinery deepening, Dangote appears to regret building the oil plant. Reflecting on his journey and the obstacles he faced, he recounted advice from friends to invest abroad due to policy inconsistencies and vested interests.

“Four years ago, one of my very wealthy friends began to invest his money abroad. I disagreed with him and urged him to rethink his action in the interest of his country. He blamed his action on policy inconsistencies and shenanigans of interest groups. That friend has been taunting me in the past few days, saying he warned me and that he has been proven right,” Dangote revealed.

As the dispute between Aliko Dangote and regulatory authorities continues to unfold, the economic implications for Nigeria remain a critical concern. The refinery’s potential to transform the energy sector and reduce import dependence is at risk, and the fallout could have significant repercussions for the nation’s economy.

Stakeholders have also expressed concern over the potential loss of jobs that will result from the failure of Dangote Refinery, or sale to the NNPCL, as no one trusts the state-owned entity that has been operating at a loss for decades, to run a profitable refinery.

Against this backdrop, all parties involved have been advised to find a lasting solution in line with Nigeria’s industrial and economic interests while ensuring a level playing ground that will foster a competitive market.