Africa’s richest man Aliko Dangote is in talks with some of the world’s biggest oil traders to help finance his mega refinery project outside of Nigeria’s commercial centre Lagos, according to a Reuters report.
The 650,000 barrel-per-day refinery has seen its deadline for completion postponed on more than one occasion as Africa’s richest man struggles to raise financing.
Recently, state-oil firm, the Nigerian National Petroleum Corporation agreed to buy a 20 percent stake in the refinery for about $2.8 billion but Dangote is looking for outside cash. NNPC’s head Mele Kyari said a process was on-going to raise $1 billion with Afreximbank to fund part of its stake purchase.
Once completed the refinery will be the continent’s largest plant and redraw major trade flows of crude and fuel in the Atlantic basin.
The billionaire has held talks as recently as a month ago with executives from the world’s top two oil traders – Trafigura and Vitol.
Read also: NNPC links 2020 revenue loss to crude price decline, COVID-19 impact
Trafigura and Vitol declined to comment. A spokesperson for the Dangote Group did not respond to multiple requests for comment.
Two sources with direct knowledge told Reuters that the option of raising another $500 million from a trade house or consortium was being actively explored.
The details of a potential loan from a trading firm have not been finalised but the trader could receive a long-term contract to supply crude and receive cargoes of refined products as repayment.
The refinery has been delayed by several years and the cost has ballooned to $19 billion from Dangote’s earlier estimates of $12-14 billion. Construction was also delayed due to COVID-19 outbreaks among workers at the site and delays getting materials, two sources with knowledge of the project said.
Many industry sources do not expect any products before the second half of next year.
Swiss traders like Vitol along with Nigerian firms have cashed in for years in gasoline-short Nigeria by supplying mega tenders and being part of lucrative crude-for-fuel swap deals for over a decade.
Getting a hold of Dangote’s fuel will give the trader a stranglehold on a key set of new oil flows. Nigeria’s new oil bill, approved last month after nearly 20 years of political wrangling, has added fuel-import licence requirements that experts fear will give Dangote an effective monopoly.
Under the new laws, the regulator will prioritize local refiners for import licences and volumes would be based on production capacity or market share.
While Nigeria will remain open in theory to international trading houses, a partnership with Dangote would be the only way to guarantee a foothold in Africa’s biggest economy.
Despite being Africa’s biggest oil producer and exporter, Nigeria depends almost entirely on fuel imports after allowing its significant refining capacity, 445,000 barrels per day, to become dilapidated over several decades.
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