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, according to the corporation Group Managing Director, Mele Kyari on Tuesday.
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.
Dangote Group previous said that NNPC and three other firms had approached it regarding a stake purchase.
Kyari said NNPC still needed cabinet approval for the plan, but said the value of having a stake in what would be the largest oil refinery in Africa is worth the cost.
NNPC’s cash flow however is constrained by gasoline price caps that have made it the sole importer of the fuel and forced it to sell at a loss.
Kyari said he had warned the government that NNPC its remittances to the government could drop to zero due to those costs – though they had not yet done so.
Union groups in Nigeria have fought against any price increases, but Kyari said he was hopeful of a deal to shed the subsidy costs within the coming months.
“The reality is that we can’t afford it,” he said. “But if you don’t do something smart, you could end up with prices that Nigerians can’t afford.”