Aliko Dangote’s $20bn oil refinery was supposed to be a “game-changer” for Nigeria.
The eponymous project, first conceived a decade ago and completed last year after delays and cost overruns, was billed as the defining plant that could wean Nigeria off its dependence on imported refined petroleum products.
Despite its status as Africa’s largest oil producer, Nigeria is unable to refine its crude locally and spends billions of dollars annually importing finished products.
But little is going to plan. The normally taciturn Dangote has spent the past few weeks briefing the press on developments at his 650,000 barrel a day refinery after an industry regulator accused him of being a monopolist, an accusation he denies.
The long-running suspicions of tensions between the well-connected billionaire and the administration of President Bola Tinubu also refuse to go away.
The refinery has been beset by various problems. The plant, which now produces diesel, aviation fuel and naphtha, has struggled to secure sufficient crude to increase manufacturing, forcing it to turn to far-flung locales such as Brazil and the US for its supplies.
“We want to buy directly from Nigerian producers,” Aliyu Suleiman, Dangote Group’s chief strategy officer, told Energy Source. “But the Nigerian producers transfer to their international trading arms and they add their margins and sell to us.”
“Given that the crude is produced here by companies that are registered in Nigeria and is being sold to a refinery in Nigeria, we believe that it would be more efficient for the transaction to be done between the two entities directly rather than through an international middleman who in this case we don’t see as adding any value,” he said.
The monopolisation allegation from the head of the Nigerian Midstream and Downstream Regulatory Authority, has worsened ties between the billionaire and the state.
Farouk Ahmed, the agency head, claimed Dangote had asked Nigeria to block the importation of diesel and aviation fuel to hand his refinery an advantage. Ahmed also alleged that Dangote’s diesel was “inferior to the imported quality. Dangote insists his diesel is the “best diesel in Nigeria”.
Dangote has since abandoned a planned steel plant that was announced earlier this year, saying he wanted to avoid being dubbed a monopolist.
There’s also a spat with NNPC, Nigeria’s state-owned oil company, which three years ago paid $2.7bn for a 20 per cent stake in the Dangote refinery. NNPC recently had its share whittled down to 7.2 per cent after Dangote said it failed to pay the balance of what it owed — largely crude supplies of 300,000 bpd over several years. NNPC refuted Dangote’s assertion, claiming it had capped its equity in the project as part of a periodic assessment of its investment portfolio to ensure alignment with its “strategic goals”.
Allegations of monopolistic practices have followed Dangote throughout his career. In the cement industry, where he controls more than 60 per cent of the Nigerian market, critics have accused him of setting excessively high prices and receiving favourable incentives from previous governments, allegations he denied in an interview with the FT last year.
Suleiman said the monopoly accusations were weightier because they came from a regulator. “If the regulator himself is making that statement, it can be seen almost as a statement that has come from the government and that’s what makes this different,” he said, while insisting that Dangote Group maintained a “very good relationship with the government on many facets”.
A presidential spokesperson said on Monday that Tinubu had ordered the NNPC to sell crude to Dangote in the local naira currency. Details of the supposed deal are unknown.
Now people in the Dangote camp and other Nigerian billionaires are warning of forces wanting to stymie the refinery. Dangote himself hinted at a business summit in June that an oil “mafia” was behind efforts to “sabotage” the refinery because his fully-functional plant would disrupt the importation value chain. A senior politician in the ruling All Progressives Congress told Energy Source there was a “cabal” that would rather see imports flowing because of the profit margins they enjoy rather than encourage local production.
“There is a concerted effort against the refinery,” said Suleiman.
“There is a value chain that has existed for many years that supplies petroleum products into Nigeria. That value chain is being somewhat disrupted.”
Suleiman said the value chain included foreign refineries, Nigerian traders and others involved in the importation of fuel into the country. “As a result there is pushback from various players that perceive — rightly or wrongly — that the economics of their operations will now be negatively impacted,” he said.
