Banks have commenced engagement with the Nigerian National Petroleum Corporation (NNPC) on how to lend the Corporation loan to acquire equity 20 per equity in the Dangote $19 billion Petroleum Refinery.
The news about plans to buy equity in the refinery broke over two weeks ago.
But in an interview with Channels Television on Tuesday monitored by The Nation, the Group Managing Director (GMD), Malam Mele Kyari, revealed NNPC will not spend the Federal Government funds to acquire the equity.
His words: “Even for this Dangote Refinery, we are not going to take our (Federal Government) money and buy it. They think we are going to take our money and pay for this refinery.
” We are to borrow for the cash flow of this business. We know that this business is viable, it will work, and that it will return dividends. It has a cash flow that is sustainable because it is a refinery business.
“In the short term, it will continue to be sustainable. And that is why banks have come up to lend to us so that we can take equity”.
He said the NNPC and the banks have done all the international processes for evaluation of the refinery and they are comfortable with the value of the business.
Asked how much the equity is worth and whether it is already signed and sealed, he said: “Not at all. Our engagement that we have signed term sheets with the owner of the Refinery rehabilitation, I am not sure that Mr. Dangote is very happy with it.
“We are taking 20 per cent equity in the Dangote Refinery. There is a valuation process. This business is very regulated. It is an international business.
“No bank will lend money to you buy equity in a business of this scale if you have not followed the basic valuation process.
“The reality is that we have a valuation of this refinery about $19 billion. I don’t have the exact figure. We haven’t closed on this to answer your question straight”.
He said there is governance that includes the authority of the Federal Executive Council to close on the deal.
According to him, NNPC will be on the board of the Dangote Refinery as a shareholder and its books will be opened to the Corporation.
Kyari said: “Petroleum is priced in Naira in our country and you buy crude in dollars. It is a banking transaction between us and customers. The CBN is there to resolve. Nigerians will not pay for products in dollars. The banks will do the conversion”.
He recalled the NNPC commenced discussions with Dangote on the equity in December 2020, adding that the refinery will come to work by 2022.
He noted: “It is coming into production. What that will do is it will deliver over 50 million litres of gasoline into our market. We are also working on our refineries to make sure we fixed 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 foreclosed the possibility of suspending the payment of under-recovery or subsidy of petrol price in July because the negotiation with the Organised Labour is still ongoing.
Asked to state the benefits accruable to Nigerians when local refineries become operational, he said it will result in the removal of N21 per litre freight cost from the Premium Motor Spirit (PMS) template.
He added there will be an advantage of the proximity of products to the consumers since it is sitting on her soil instead of taking 14 days to arrive from Europe.
The GMD confirmed that the landing cost of petrol was N256 per litre last week.
He insisted that Nigeria does not consume up to 60 million litres daily.