Nigerian billionaire Aliko Dangote is on a mission to raise significant funds to enhance operations at his $20 billion oil refinery located near Lagos. According to sources close to the situation, Dangote is currently engaging with commercial lenders, development banks, and oil traders to secure the necessary financial backing for crude oil supplies.
Dangote Industries has been sourcing crude oil from countries like the United States and Brazil, and discussions have also been held with suppliers from Africa, including Libya and Angola. The goal is to ensure enough crude is available to meet the refinery’s production target of 650,000 barrels per day, which Dangote considers a crucial step for the country’s future.
Previously, he anticipated that the refinery would reach full capacity by the second quarter of the upcoming year, though he acknowledged that past timelines have often been adjusted. Currently, the refinery is operational and producing around 420,000 barrels per day.
Dangote aims to tackle the “absurd” challenge of Nigeria, Africa’s largest oil producer, relying entirely on imports for its refined petroleum due to insufficient local refining capabilities. The plant began producing jet fuel and naphtha earlier this year and initiated petrol production in September, offering a glimmer of hope that Nigeria may soon break free from decades of fuel imports.
Estimates suggest that securing a minimum supply of 300,000 barrels per day could cost around $2 billion every three months. However, potential investors have displayed concerns, particularly regarding Dangote’s challenges in procuring a consistent crude supply. Additionally, worries over Nigeria’s devalued currency, the naira, have surfaced, raising anxiety among financiers.
A banker involved in the fundraising effort expressed skepticism, stating that the refinery might struggle to turn a profit due to its elevated construction costs and the naira’s significant devaluation. Last month, Dangote met with Nigerian President Bola Tinubu and Mele Kyari, the head of Nigeria’s state oil company, to discuss the arrangement for NNPC to supply 365,000 barrels per day of crude oil, with payments to be made in naira.
While the specifics of the ongoing discussions remain under wraps, NNPC has a diminished 7.2 percent stake in the refinery after a financial deal fell through, which initially intended for it to hold a larger share. Many, including Dangote, have raised doubts about NNPC’s capacity to deliver the crude oil needed, given its commitments to sell substantial oil volumes through forward contracts.
Should NNPC fulfill its commitments, Dangote would still require an additional 185,000 barrels per day, translating to more than 5 million barrels a month, to achieve a target of 550,000 barrels per day by January. The Africa Finance Corporation, a prominent development lender and existing investor in the project, is part of the discussions to raise funds.
Dangote’s vision for the refinery includes fulfilling Nigeria’s complete petrol demand, which he estimates at 30 to 35 million liters daily. While some critics argue that he seeks to establish a quasi-monopoly in this sector, the refinery represents a transformative opportunity for Nigeria in its pursuit of energy independence.