In a rare outburst last week, Aliko Dangote, Africa’s richest man, offered to sell his $20 billion fortune to the state-owned Nigerian National Petroleum Company Limited (NNPCL).
“Let them (NNPCL) buy me out and run the refinery the best way they can. They have called me a monopolist. That is a false and unfair accusation, but it is okay. If they buy me out, at least their so-called monopolist will be out of the way,” he said in a plea that neither the interviewer nor the readers knew whether to dismiss as a joke or an expression of frustration.
In the same interview, he revealed that a friend who had warned him against investing in Nigeria had begun to taunt him for ignoring the warning. “Four years ago, one of my very wealthy friends began investing his money abroad. I disagreed with him and urged him to rethink his actions in the interest of his country. He blamed his action on policy inconsistencies and shenanigans of interest groups,” Dangote explained.
NNPC extroversion and failed equity deal
A week earlier, the famous businessman revealed that NNPCL’s stake in the Dangote Refinery had fallen from 20 per cent to 7.2 per cent after the company failed to meet its payment obligation, which was due last month. A rattled NNPCL management responded by saying that the company “periodically assesses its investment portfolio to ensure alignment with the company’s strategic goals”. In any case, few Nigerians were shocked by the public revelations.
The equity was initially valued at $2.76 billion in 2021 when the duo announced the deal would be paid in three tranches – cash, crude oil sales and the injection of profits accruing to the company. But while the NNPCL had long since paid the first tranche, it defaulted on the second stage – trading crude oil for equity.
The Dangote Refinery has been forced to source feedstock from Brazil and elsewhere, with West Texas Intermediate (WTI) from the United States accounting for a third of the input. The company may have opted for WTI because of its cost advantage, but that is only one of the reasons it is not sourcing much of its feedstock from the local market. Another reason is that Nigeria has tied up much of its future oil production in oil-backed loans and other swap deals, leaving little or nothing for local refiners, including Dangote – a project touted as a game changer in the global refining ecosystem.
Worried by complaints from local refiners earlier in the year, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), a sister company of the NNPCL, mandated all oil companies in Nigeria to supply crude oil to domestic refineries before shipping abroad. The directive was seen as a potential solution to the feedstock crisis, which had become a major threat to the nascent private refining industry. Unfortunately, the directive was not enforced, leading to accusations that the oil producers were out to frustrate the local refining industry. Amid monopoly allegations against Dangote, the businessman also announced a few days ago that he had cancelled an earlier plan to build a steel plant in the country.
Potential conflict of interest
Dangote may have incurred the wrath of regulators when he revealed that some people in the NNPCL were running a blending scheme in faraway Malta, where they were importing substandard petrol products into the country. Dangote, who was speaking at a public forum, urged Nigerians who must have been encountering problems with their vehicles as a result of the substandard fuel to take his allegations to task.
NNPCL has denied knowledge of the Maltese facility, just as the regulator has argued that the facility, if it exists, does not affect NNPC’s business operations and strategic actions.
What is intriguing, however, is that trade data suggest a sudden increase in the value of imported petroleum products from Malta last year. Moreover, problems with the quality of imported fuel are not new. Two years ago, the downstream market was grounded for almost two weeks after the NNPC, which manages the importation and distribution of fuel, said it had found methanol in the imported white commodity at levels far higher than allowed. It informed citizens that the product came from the government’s direct suppliers in Antwerp, Belgium. Nothing has been heard of the subsequent investigation into the importation of dirty fuel, which has become a regular occurrence.
Amid the tussle between regulators and local refiners, the country has once again been plunged into shortages, with fuel queues in major cities. Nigeria’s four public refineries, managed by the NNPCL, are simply too inefficient to provide any relief.
At full capacity, which was previously expected by the end of the year, the Dangote Refinery was expected to produce 99 million litres (almost twice Nigeria’s current daily consumption) from the country’s sweet crude, solving the historic problem of fuel shortages and product adulteration. But this lofty dream could be sacrificed to the ongoing self-destructive war.