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Afrexim Bank to lend Nigeria $1 bln to finance equity stake in Dangote Refinery

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Nigeria plans to borrow $1 billion from the continental Export-Import Bank as part of the funding for the 20 percent equity stake in the yet-to-be-completed Dangote Refinery, according to the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari.

The state-oil firm had stated that it will take up 20 percent stake in the 650,000 barrel per day capacity petrochemical refinery being constructed in Lekki area of Lagos by Africa’s richest person, Aliko Dangote.

The cost of the 20 percent equity has been put at $3.9 billion, but Afrexim will provide $1 billion of the amount while the NNPC will seek the balance from other lenders.

Kyari has told the nation this week that the oil firm was in talks with some banks to borrow around $3.9 billion to purchase stake in the largest single petroleum refining plants, which is expected to commence operation in the first quarter of next year.

”We are going to borrow for the cash flow of this business. We know that this business is viable, it will work and it will return dividends. It has a cash flow that is sustainable because it is a refinery business.

“We are borrowing $1billion from a syndicate being coordinated by Afriexim. I am sure you know no one is going to give you $1billion if they don’t see your partway to the recovery of that.

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“And I am proud to say that we are not going to use any government money to pay that bank. What we are going to do is to get it from the cash flow of this refinery. It means that these banks will see that this refinery will make money and it will pay dividends that will enable us to pay them.

“We have seen we can cash out our investment in five years.”

Kyari also said that the NNPC  would buy equities in Nigerian petroleum refineries that produce over 50,000 barrels per day to guarantee energy security.

According to him, the corporation will still get the consent of the Federal Executive Council for the deal.

He restated that Dangote  Refinery would begin production in 2022  while the Port Harcourt Refinery would commence production before the completion of its rehabilitation.

On the involvement of contractors in running the nation’s refineries, Kyari said: “We have issued the EPC contract of Port Harcourt Refinery. We have changed the entire model. The model is that the best practice is for you to get Operation and Contractor to do your refineries not to do it yourself.

“In many places, you see companies engaging third parties to run their refineries. It is actually part of the conditions President Muhammadu Buhari gave that the NNPC must hand over the operation of these refineries to  O and M contractors.

“We will use some of our staff members  to run  them.”

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