• Thursday, February 29, 2024
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Dangote under pressure as giant refinery nears production — FT

Three subsidiaries of Dangote Group listed on the Nigerian Exchange Limited (NGX) saw their combined market capitalisation rise by N513.69 billion on Monday, the first trading day after the announcement of the start of production at the conglomerate’s oil refinery.

Nigerian billionaire Aliko Dangote faces accusations of unfair practices and a struggle to secure crude supplies.

If all goes to plan, Aliko Dangote, Nigeria’s most successful businessman and the richest person in Africa, is about to bring online a $20bn oil refinery outside Lagos that could transform the continent’s biggest economy.

Starting operations at the vast facility would mark the culmination of a career in which Dangote, whose personal wealth is estimated by Forbes at $10.5bn, has built a fortune through salt, flour, sugar and, most significantly, cement.

Provided his Dangote Group can secure sufficient crude oil and the long-delayed plant works as it is supposed to — neither of which is a given — the refinery could start churning out diesel, kerosene and jet fuel as soon as next month.

“We’re starting with 350,000 barrels a day,” Dangote told the Financial Times, adding that a deal had already been clinched for the “first cargo of about 6mn barrels” for delivery next month.

Dangote, 66, said he believed the refinery could reach its capacity of 650,000 barrels a day by the end of 2024, although the IMF has said it doubts it will reach more than a third of that by 2025.

At full tilt, the refinery, the world’s largest “single train” facility with just one distillation unit, could save Nigeria billions in foreign exchange currently spent on imported fuel. It was “shameful”, Dangote said, that Nigeria, a major oil producer for more than 50 years, could not refine its own crude in anything like sufficient quantity.

Amaka Anku, head of the Africa practice at political risk consultancy the Eurasia Group, said the refinery was “a massive, complicated undertaking”. In a country where most businesspeople looked for short-term profits, she added, it was a blessing “that we have someone like Dangote who is willing to spend billions of his own money on long-term projects”.

The Dangote Industries oil refinery and fertilizer plant site in the Ibeju Lekki district, outside of Lagos, Nigeria. Some observers doubt the Dangote refinery will work at all, or predict that it will be inefficient © Tom Saater/Bloomberg

Dangote conceded there were times when he thought the massive project — long delayed and about $8bn over budget — might jeopardise his business empire.

Read also: Dangote refinery secures 300,000bpd crude refining licence

“The challenges that we faced, I don’t know whether other people can face these challenges and even survive,” he said. “It’s either we sink or we sail through. And we thank the Almighty that at least we’ve arrived at the destination.”

Yet in what is supposed to be Dangote’s moment of triumph, he finds himself under intense pressure. A rival industrialist has accused him of underhand business practices and of gaining unfair access to foreign exchange from a central bank whose former governor is now being investigated by the authorities. Dangote has denied both allegations.

In addition, the Nigerian National Petroleum Corporation has been unable or unwilling to supply him with the crude his refinery needs, although Dangote insists it is only a matter of weeks before oil starts flowing.

A few even doubt the refinery will work at all, or predict that it will be inefficient. Rumours are also rife that Dangote, whom critics accuse of having unduly benefited from close relations with four successive administrations, has fallen out with Bola Tinubu, who became president in May.

“Dangote is not as influential as he used to be,” said Ricardo Soares de Oliveira, an Oxford professor of the politics of Africa, who described the billionaire as a Nigerian oligarch. At a time when he had bet his fortune on the success of the refinery, that was not a comfortable position to be in, several close observers of Nigeria said.

Vehicles travel along Broad Street in Lagos. Lagos in Nigeria, Africa’s largest economy © Benson Ibeabuchi/Bloomberg

“This is the first time the elected government is not particularly aligned with Aliko,” said one senior banker who spoke on condition of anonymity. “So it has opened a window of opportunity for people to peddle their own influence.”

Read also: Dangote refinery to test-run next month with crude from NNPC

For many Nigerians, the billionaire industrialist has done more than anyone to invest in the country and create jobs. “We need 10 Dangotes,” said Anku.

But for others he is a ruthless monopolist who depends on the government to protect him from competition and to reduce his tax bill by giving his business so-called pioneer status.

“The Romans figured out how to make cement 2,000 years ago,” said Feyi Fawehinmi, a Nigerian author living in London. “And yet Nigeria is making billionaires out of it.”

In the interview, Dangote complained that rivals were carping because they did not understand what it took to run a business that was the country’s biggest private-sector employer and its biggest taxpayer. “Sometimes when people talk about us, Dangote, it’s like the government is holding everybody down and allowing us alone to fly.”

He did not want to discuss in detail a tussle over the supply of crude with NNPC, which owns 20 percent of the refinery after a $2.76bn equity purchase in 2021. Nigeria produces about 1.4mn barrels of oil a day, well short of its Opec quota of 1.8mn barrels, with much pre-sold in forward contracts.

“Let’s not have the blame game here,” he said of NNPC’s reported difficulties in meeting the refinery’s requirements. “We have resolved all the issues of supply.”

A man drops a bag of Dangote cement while offloading a truck in Abuja, Nigeria. Dangote is Africa’s largest maker of cement © Afolabi Sotunde/Reuters

Dangote rejected suggestions NNPC was playing hardball to negotiate a bigger share of the refinery, which he said would generate revenue of $25bn a year at full capacity. “I don’t think NNPC needs to buy more shares. I think they’re OK with what we’ve given them.”

The refinery would eventually be floated as a separate company, he said, initially on the Lagos stock exchange.

To build the massive project on 2,500 hectares of swampland outside Lagos, Dangote had to construct his own port and road to take delivery of heavy equipment, establish his own trucking company to move it and his own industrial welding facility to put it together. He said he had laid enough cable to stretch twice around the globe and had moved 65mn tonnes of sand. “You will not see this kind of project in Nigeria in the next 20 years.”

No outside contractor had been willing to take on Nigerian risk, he said, so he had to design and build the whole thing in-house. “We didn’t cut costs. We didn’t cut corners,” he said. “We didn’t do it for people to clap us. We did it for posterity.”

However, some have chosen this moment to snipe. Dangote has accused BUA Group, Nigeria’s second-biggest cement manufacturer, led by founder and chair Abdul Samad Rabiu, of sponsoring attacks on his company in the Nigerian press. Rabiu is worth $6.5bn, according to Forbes.

Stories allegedly floated by BUA Group have accused Dangote of profiting from illegal foreign exchange trades worth billions of dollars. The government is investigating forex allocations made when Godwin Emefiele, the former central bank governor, was in charge of distributing dollars at the official rate to chosen industries at far below market prices.

BUA Group responded to the claims by accusing Dangote of trying to sabotage the business for more than 30 years, including once allegedly issuing the company with a dud cheque. Rabiu declined to comment.

The two are fighting in court over an alleged attempt by Dangote to prevent Rabiu’s company mining limestone in Edo state. In a lengthy statement published in local newspapers, Dangote accused BUA Group of rehashing discredited stories and said he could account for every dollar of foreign exchange.


Employees work on the trading floor at the Nigerian Stock Exchange in Lagos, Nigeria

Matthew Page, a former CIA expert on Nigeria, said Rabiu donated heavily to the Tinubu election campaign and had been emboldened by his close relationship with the new president. The cement market was smaller after eight years of economic stagnation, he said.

“The tide pool has shrunk and the two biggest lobsters in the tank are snapping at each other.”

Dangote would not be drawn on his fight with Rabiu or his relationship with the president. But he said nothing should distract from the refinery — a “national project” that was “bigger than Dangote”.

After years of promises, he was adamant that everything was ready. “The refinery is done,” he said. “The baby can come out at any time.”