Africa’s wealthiest individual, Nigerian business magnate Aliko Dangote, is in talks to secure billions of dollars in additional funding to ramp up production at his $20 billion oil refinery on the outskirts of Lagos.
The refinery, one of the continent’s most ambitious infrastructure projects, is designed to revolutionize Nigeria’s energy landscape and reduce the country’s reliance on imported petroleum products.
According to reports from the *Financial Times*, Dangote is negotiating with a mix of commercial lenders, development banks, oil traders, and other key industry players to raise the necessary funds to ensure a stable and sustained crude oil supply for the refinery, which is capable of processing up to 650,000 barrels per day (bpd) once fully operational.
Dangote Industries has already procured crude from international suppliers in the US, Brazil, and is exploring deals with African nations like Libya and Angola to meet its growing demand.
The refinery, which began production earlier this year, is already producing 420,000 bpd, but Dangote has set ambitious goals to reach full capacity by mid-2025, despite delays in meeting previous targets.
In September, the plant started producing jet fuel and naphtha, followed by petrol production in October, fueling hopes that Nigeria’s decades-long reliance on fuel imports could finally be eliminated.
Read also: NNPC signs 10 year gas sale, purchase deal with Dangote refinery
However, Dangote’s effort to secure a steady flow of crude has been complicated by several factors, including challenges with the Nigerian National Petroleum Company Limited (NNPC), the country’s state-owned oil corporation, which is supposed to supply a significant portion of the crude needed.
In recent meetings, Dangote sought assurances from President Bola Tinubu and Mele Kyari, the CEO of NNPC, to ensure a reliable supply of 365,000 bpd of crude, to be paid for in Nigeria’s increasingly devalued currency, the naira.
In December, the Africa Finance Corporation (AFC), a pan-African development bank already invested in the refinery, led a financing round to help the project get off the ground.
However, as the refinery’s production ramps up, Dangote is now faced with the challenge of securing additional funds to cover both crude procurement and the refinery’s operational costs, which could reach approximately $2 billion every 90 days for a minimum supply of 300,000 bpd.
Several financiers have expressed concerns over the volatility of the naira, which has been significantly devalued in recent months, making the costs of financing and importing crude more expensive. Some analysts even question whether the refinery will ever turn a profit in real terms due to these ongoing financial pressures.
One source told the *Financial Times*, “The refinery was built over-budget, and the naira, which is a major currency of future revenue, has devalued massively.”
Additionally, NNPC’s stake in the refinery has been reduced to 7.2 percent after it failed to meet the payment schedule for a deal valued at $2.7 billion. NNPC paid an initial $1 billion in 2021, but it has not been able to cover the remaining $1.76 billion, which was to be paid in crude supplies.
The situation has cast doubt on NNPC’s ability to fulfill Dangote’s needs, with analysts questioning whether the state oil company can meet its obligations given the significant quantities of crude it has committed to forward contracts.
Despite these hurdles, Dangote remains committed to using the refinery to meet Nigeria’s entire demand for petrol, which he estimates at 30 to 35 million liters per day. Once fully operational, the refinery would drastically reduce the need for imported fuel, which costs the Nigerian government billions annually.
A report by the Knightsbridge Strategic Group (KSG), a geopolitical intelligence firm, suggests that Dangote’s refinery could eventually help reduce fuel costs in Nigeria and increase competition in the European fuel market.
Once at full capacity, Nigeria could emerge as a significant exporter of refined oil products, providing an alternative supply to European nations looking to reduce their dependency on Russian oil.
However, KSG also warns that persistent crude shortages and the weakened naira could prolong the refinery’s struggle to reach full capacity.
The report states, “The longer the NNPC delays its supply of crude, the more likely the refinery will face financial troubles due to its massive debt commitments.” It projects that the refinery may not reach its full capacity until at least the second quarter of 2025, which could lead to continued reliance on expensive foreign crude imports, further exacerbating Nigeria’s economic woes.
The KSG also highlights the broader political implications of Nigeria’s refinery challenges. The government’s failure to resolve issues surrounding fuel supply could lead to rising inflation, increased fuel prices, and potentially, social unrest. The removal of fuel subsidies earlier this year has already sparked protests, and there are fears that continued difficulties with the Dangote refinery could exacerbate public dissatisfaction.
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