As Nigerian Banks Lend To NNPC To Buy Shares in Dangote Refinery

As Nigerian Banks Lend To NNPC To Buy Shares in Dangote Refinery

It is business for the banks and they are doing what they have to do: make money. But for the national oil corporation, NNPC, I am not sure what to write here. Yes, borrowing money from banks to buy shares in Dangote Refinery when you could have borrowed the same money to fix the four refineries you have built, but unable to maintain, seems odd.  But what can we say since there are paid commenters who are now employed by the government to discredit any critical commentary (thanks Senator Shehu Sani for that revelation). I take you to that African proverb: “nwa nnunu bere na ikwubo ka no n’ala” [a bird which flies from the ground to the anti-hill might have thought that it had left the ground, but when you look critically, it is still on the ground].

Nigerian state oil company NNPC has signed term sheets with Dangote Group to buy a 20% stake in the company’s oil refinery under construction in Lagos state, NNPC’s director said on Tuesday.

Mele Kyari said NNPC is in talks with banks to borrow on the back of its cash flow to buy the stake in the 650,000 barrel per day (bpd) refinery. He declined to put a dollar figure on the stake, but said the refinery is worth an estimated $19 billion.

As Chinua Achebe will write, proverbs are like the kola nuts upon which words are eaten. Nigeria, good luck investing in Dangote Refinery. But remember the new market regulations: Dangote Refinery by law should not offer you a different price than it offers to other customers under the same conditions just because you are an investor. If not, I will call Access Bank to waive fees on my bank transactions as I am a mini-investor! 

Simply, it does not make sense to me why we need to follow this borrow-invest path. A better playbook would have been this: place an order and get a bulk discount once the refinery is running. Of course, we defer to our leaders as they have data which drives these decisions.

Meanwhile, congrats to Dangote Refinery: it is already winning. Playing as I wrote in my book – The Dangote System. It is called Conglomerate Tax: citizens and nations pay huge penalties for conglomerates to serve them!

---

1. Advance your career with Tekedia Mini-MBA (Sept 13 – Dec 6, 2021): 140 global faculty, online, self-paced, $140 (or N50,000 naira). Click and register here.

2. Click to join Tekedia Capital Syndicate and own a piece of Africa’s finest startups with a minimum of $10,000 investment.

Share this post

3 thoughts on “As Nigerian Banks Lend To NNPC To Buy Shares in Dangote Refinery

  1. This is just another vicious cycle, but it shows that public organization are not fit to run alone so also private. However, what beat me is how this public organization keep deteriorating.

    Yes, it could be understandable that we cannot run one as a public entity so why borrow to buy share? What of all the profit they have made in the past?

    It is well.

    Reply
    1. 20% of 19 billion is 3.8 billion that is 10 times the cost of a battery plant.

      Just read now that a Battery production is $300 million, which is the future.

      With the increased appetite of the world for green energy this is the best time to re-write the history of Africa.

      If we ditch oil and go into this we would have more than enough capital to set up a manufacturing centers in Nigeria, Zimbabwe and even fix our logistics chain.
      From my predication, I expect Dangote to move into Renewables because the urgency of climate matters is making even western firm pivot, so, independent bodies would be setup to enforce global climate laws. Hence, rather than play catch up, it’s best we lead like the giant we claim we are. Set up plants here, else, if we slack, we would only be stack holders not builders.

      We cannot afford to lose out on this green opportunity.

      It’s big

      Let’s think.

      Reply
  2. According to the NNPC honcho, Nigeria has to do it, to guarantee energy security! You now wonder under which security that allowed us to import petrol products for decades, but as Dangote Refinery was about to become operational, magically, energy security has become priority for Nigeria! And he went on to state that the NNPC is buying the shares on behalf of all Nigerians, with a loan of course…

    When you buy 20% stake in a new company, you are more or less paying for everything expended to bring the company to that stage, nobody needs to kid anyone here; Dangote is the winner in this ridiculous deal.

    If the rationale behind this acquisition is about anticipated future profit from the refinery, then they are simply delusional, because it may not come in another decade, add that to cost of servicing the debts occasioned by this deal, and you see a country bleeding all round.

    We do not possess the level of competence and credibility required in some of the deals we get involved in, but being that we consistently suffer from ethical blindness, the lure to entangle ourselves in these things remain irresistible.

    As for the paid commenters, they are part of the lost souls, a wasted generation; but time will take care of them.

    Reply

Post Comment