Revealed! Reasons foreign investors stopped investing in Nigerian refineries after completion of Dangote's

• Foreign financiers who were expected to contribute to the construction of about twenty modular refineries in Nigeria have withheld their payments
• Reports claimed this was because they perceive that after construction is completed, it will be challenging to obtain guarantees about the supply of crude oil to the facilities
• The government did not want to provide the refineries the assurance because they thought the money might not end up being used for the refineries' construction

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

International investors who were supposed to provide funding for building roughly 20 modular refineries in Nigeria have deferred their contributions since it will be challenging to secure assurances regarding the supply of crude oil to the facilities once they are finished.

There are 25 modular refineries in Nigeria with licenses. Photo Credit: FG, Dangote refinery
Source: UGC

The international oil companies that make up the majority of Nigeria's crude oil producers have not been able to convince investors that crude will be supplied to the modular refineries when the facilities are ready to produce refined petroleum products.

As a result, the facilities' investors have held onto their money until the federal government can persuade IOCs to give the assurances necessary for modular refiners to get their crude oil supply.

Challenge in completing refineries

Punch reported that there are now 25 modular refineries in Nigeria with licenses. There are five of them running and producing naphtha, black oil, kerosene, and diesel.

About ten are being completed in different phases, while the remaining ones have been granted licenses to open.

The publicity secretary of the Crude Oil Refinery Owners Association of Nigeria (CORAN), Eche Idoko, stated:

“Only about five of our members have completed their refineries. The others are having a major challenge. This challenge is that the people who are supposed to finance them have not disbursed financing for construction because they want some level of guarantee.“A guarantee that if they finish the refinery, they will get feedstock, which, of course, is crude oil.”

Authorities not giving guarantee

Idoko stated that the authorities did not want to assure the refineries because they think the funds may eventually not be utilised for building the refineries but selling the feedstock.

He added:

“This, for us, is neither here nor there because what the financiers were asking for is not that you should supply them the crude, but that we should be able to give them what we call a Conditional Term Sheet and Heads of Terms. And this means that when you finish your refinery as an investor, you will be supplied feedstock.”

He said modular refiners as well as some downstream operators in the sector have repeatedly called on the regulator to mandate the international oil companies to supply crude to indigenous refiners first before exporting the commodity.

Idoko stated:

“The financial houses know that the regulators do not own crude and don’t produce the commodity, but they want to see something from your suppliers that when you finish your refinery, they are going to give you crude under some clearly specified terms.“But we have not been able to get the regulators to see reasons and impress it upon these IOCs to give us this kind of document. So what we have received from them is that the guidelines state that they can supply crude when the refinery is at least operating at 50 per cent,”

Oil companies ignore Dangote Refinery

Legit.ng earlier reported that Aliko Dangote, chairman of the Dangote Group, lamented that international oil companies in Nigeria are not prepared to supply crude oil to his refinery with a capacity of 650,000 barrels.

In a CNN interview, Dangote claimed that the multinational oil corporations were accustomed to selling crude for foreign exchange.

He added that despite the Nigerian National Petroleum Company Ltd's best efforts, the IOCs prefer to sell their products abroad.

Proofreading by James Ojo Adakole, journalist and copy editor at Legit.ng.

Source: Legit.ng