Nigeria’s expected dividends from its natural gas company are expected to drop after a London court ordered the payment of $380m to Vitol and Glencore for a contract breach.
Nigerian Liquefied Natural Gas (NLNG) is a joint venture of four oil firms. The Nigeria National Petroleum Company (NNPC) – the national oil firm – holds 49%, while Shell owns 25.6%. Total and ENI hold 15% and 10.4% respectively.
Of the $380m judgment debt, Nigeria will incur a loss of about $186.2m, a major blow to a country that is seeking loans to finance its 2025 budget which has a deficit of over 40%.
Established in 1989, the gas firm is one of the best-run companies co-owned by the Nigerian government and has paid over $21bn in dividends to the Nigerian government since its inception.
Legal battle
Reuters news agency reported that trading firm Taleveras won a legal battle in a London court against NLNG for non-delivery of 19 cargoes of liquefied natural gas in 2020 and 2021.
Taleveras had sold some of the cargoes to Vitol and Glencore in anticipation of the crude promised by NLNG.
However, Vitol and Glencore sued Talaveras which in turn instituted legal actions against NLNG and won but an appeal was filed and NLNG lost.
The latest judgment ends the litigation, with NLNG expected to pay $260m to Vitol and $120m to Glencore.
NLNG’s revenue has dropped in recent years due to dwindling investments in gas and supply challenges.
In 2022, it paid dividends of $1.1bn to the Nigerian government, but in 2023, it paid $849.3m, representing a 29.5% drop.
With the latest court judgment, the NLNG’s dividends will drop as the debt will be paid either through direct deductions from dividends or through cargoes, says energy expert Dan Kunle.
Improved investments needed
Kunle, who holds decades of experience in the private and public sectors, tells The Africa Report that there is a need for improved investments in gas.
“NLNG has in three years declared force majeure and its exports have dropped by 40%,” he says.
“If you don’t honour business transactions, you will be beaten. When you do what is wrong, you lose money,” he adds.
A government official, however, tells The Africa Report that the sum will not have immediate shocks on the Nigerian government because NLNG will not be expected to pay at once.
“It will be paid in bits either through funds or cargoes over some time,” he adds.
A spokesperson for the organisation did not respond to queries.
