Aliko Dangote, Africa’s richest man and a well-known Nigerian businessman, is navigating a tricky financial situation as he tries to raise billions of dollars to boost production at his $20 billion oil refinery near Lagos.
The massive project aims to change Nigeria’s energy sector by cutting down the country’s dependence on imported fuel.
The refinery, which can process up to 650,000 barrels of crude oil daily, has already started producing jet fuel, petrol and naphtha.
However, it’s facing challenges in reaching full capacity due to ongoing issues with securing enough crude oil.
Dangote is in talks with several financial institutions, including commercial banks, development banks, and oil traders, to get the money needed for crude oil supplies.
Reports say that the Africa Finance Corporation (AFC), a key investor in the project, is actively involved in these discussions.
The AFC had earlier helped secure funding to get the refinery running. Despite these efforts, ensuring a steady supply of crude oil has been tough.
Dangote Industries has been sourcing crude from international markets, such as the United States and Brazil, and is also looking into deals with African countries like Libya and Angola.
The refinery, which started production earlier this year, is currently running at about 420,000 barrels per day.
Dangote plans to increase this to 550,000 barrels per day by January and reach full capacity by mid-2025. But those plans have been complicated by delays in securing crude oil from the Nigerian National Petroleum Company (NNPC), which is supposed to provide a large share of the crude needed.
Recently, Dangote met with Nigerian President Bola Tinubu to discuss getting NNPC to supply 365,000 barrels daily.
A major challenge in all this is the devaluation of the Nigerian Naira. Investors are worried about the currency’s instability, which has made financing deals harder and increased the cost of importing crude oil.
Some analysts have even questioned whether the refinery will be profitable under these financial pressures.
The weak Naira has made managing costs difficult, with estimates suggesting it could cost around $2 billion every 90 days to keep a minimum supply of 300,000 barrels of crude oil.
The relationship between Dangote and the NNPChas also hit a rough patch. The NNPC’s stake in the refinery has dropped from 20% to 7.2% because it could not meet payment obligations under a previous $2.7 billion deal.
This raises concerns about the NNPC’s ability to stick to its commitments, especially since it already has existing contracts for crude oil sales.
Despite these challenges, Dangote remains hopeful about what the refinery can do for Nigeria’s economy.
He believes that once the refinery is fully operational, it could end Nigeria’s reliance on imported fuel and lower costs for consumers.
Currently, Nigeria spends billions each year on importing fuel, and Dangote estimates the country needs about 30 to 35 million liters of petrol daily.
As Dangote continues to look for funding and manage supply chain issues, his efforts could reshape Nigeria’s energy sector and drive economic growth in the region.
However, the success of this ambitious project depends on overcoming financial hurdles and ensuring a reliable supply of crude oil in a tough economic environment.
