Why Dangote Refinery is selling 12.5 stake to Nigerians

• Fitch Ratings has disclosed that the Dangote Refinery is offering to sell a 12.5% stake to raise funds
• The stake is reportedly the remainder of the 20% share that NNPC refused to acquire in 2024
• The refinery also promised to release Premium Motor Spirit (PMS), known as petrol, into the Nigerian market in August

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.

The Dangote Group is reportedly exploring the sale of a 12,5% stake in the newly commissioned refinery to meet its financial obligations.

The global rating agency, Fitch Ratings, disclosed this in its report on the refinery.

Chairman of the Dangote Group, Aliko Dangote, to list refinery for sale Credit: Bloomberg/Contributor
Source: UGC

Dangote refinery to sell NNPC’s 12.5% stake

The Nigeria National Petroleum Company Limited (NNPC) acquired a 7.25% stake in the facility for $1 billion, with an option to purchase the remaining 12.75% stake by June 2025.

The report disclosed that since the national oil firm could not complete the stake acquisition, the Dangote Group plans to divest 12.75% of DORC in 2024.

Fitch said the Dangote Group wants to service its syndicated loan maturing in August 224 from the equity divestment, but it expressed doubts the group would meet the obligation.

It also noted that Dangote has debt servicing requirements concerning the loan raised to finance the refinery’s construction.

Fitch said:

“Further delays in meeting the funding requirements would significantly increase the likelihood of financial restructuring or default and lead to further rating downgrade.”

According to reports, the $20 billion facility operated at about 50% capacity in the first six months of this year, producing about 325,000-375,000 barrels of petroleum products daily.

It said the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) contribution from the Lagos-based refinery has been below its previous projection as it ramps production.

Reports say the refinery has secured debt raised at subsidiary levels amounting to $2.7 billion at the end of 2023, representing 49% of the total debt.

The report read in part:

“We view the shareholder loans as subordinated debt. The company has also raised senior unsecured debt amounting to N350 billion with long-dated maturities in 2029 and 2032 to finance capex requirements.” 

Dangote Refinery repays $2 billion loan

In June, the Chairman of the Dangote Group, Aliko Dangote, disclosed that the group had paid off a $2.4 billion loan for the refinery.

In the last two months, the Dangote refinery has been involved in altercations with petroleum regulators in Nigeria.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMPDR) accused the facility of producing low-quality fuel.

Refinery management debunked the claim, saying that petroleum products from the facility are 80% superior to imported ones. They challenged NMDPR to come and test its products.

Legit.ng reported that Dangote promised that petrol from the refinery would be available for Nigerians to purchase in August.

Dangote Industries shed N1.2trn market value in July

Legit.ng earlier reported that companies owned by Nigerian billionaire Aliko Dangote and under the Dangote Group lost about N1.21 trillion in market capitalization in July 2024 after experiencing a double-digit share price drop.

Dangote Cement, the most capitalized stock on the NGX, Dangote Sugar Refinery, and NASCON Allied Industries are the three most traded stocks under the Dangote conglomerate.

The firms’ share prices dropped by 10, 13.6, and 19.8%, respectively, translating into a market share cap loss of N1.21 trillion in the period under review.

Source: Legit.ng