Nigerian tycoon Dangote to build Africa’s largest oil refinery
Africa’s richest man, Alhaji Aliko Dangote, President of Nigeria-based conglomerate Dangote Industries Limited (DIL), sealed a $3.3 billion (N512 billion) financing deal in Nigeria on Wednesday to build Africa’s biggest oil refinery. Large fertiliser and petrochemical plants are also covered under this expansive deal, which promises to change the shape of the petroleum landscape in Sub-Saharan Africa.
The total cost for the plants, scripted to sustain the diversification agenda of DIL, will be $9 billion (N1.4 trillion), of which $6 billion will be raised from loans and the remainder $3 billion will be pumped in as equity by DIL. The loan deal was entered into with 12 local and foreign banks, with Guaranty Trust Bank (GTBank) and Standard Chartered Bank leading the consortium of financial institutions in the fund syndication deal at a local and global level respectively.
Dangote said the refinery would have a capacity of 400,000 barrels a day, and would cut down Nigeria’s fuel imports by 50 percent and “effectively stop the importation of fertiliser”, a crucial milestone indeed for a country which buys most of its petrol,diesel and fertilizers abroad and spends billions of dollars in subsidies to keep pump prices low. All this, despite being Africa’s largest oil producer, with output of nearly 2-million barrels a day.
DIL makes up more than 30% of the total market capitalisation on the Nigerian Stock Exchange, dealing primarily in food and cement importation and, more recently, it has forayed into production. Dangote Cement is the largest producer of the building material in sub-Saharan Africa and plans to list on the London Stock Exchange in 2014 or 2015.
Announcements in Nigeria of grand projects that never materialise — including a $23bn agreement with China in 2010 to build new refineries — are frequent. But Dangote, who has an estimated net worth of $20 billion, has an enviable business record and far-reaching political influence, which fuels genuine expectation that the refinery would be built.
Dangote added that job creation was a crucial aspect of the project, with the plants expected to generate up to 9,500 direct and 25,000 indirect jobs. This promise of an unprecedented spur to employment has “excited and impressed” African organised labour, union leaders stated.
Nigeria’s oil refining capacity at its four state-owned plants is 445,000 barrels a day but ageing infrastructure and poor maintenance means output is often less than half that. Shortages of petrol are frequent, and the opaque subsidy system has allowed fuel importers and corrupt officials to siphon off billions of dollars in recent years.
The refinery is expected to be completed by 2016, and will be built by UOP, a subsidiary of Honeywell in the US, according to Dangote. He has said the refinery can make a profit even if the subsidy on petrol is maintained.
Sources: Financial Times, www.ngrguardiannews.com
Image Source: www.bdlive.co.za
Established in May 1981 as a trading business with an initial focus on cement, the Dangote Group diversified over time into a conglomerate trading cement, sugar, flour, salt and fish. By the early 1990s the group had grown into one of the largest trading conglomerates operating in the country.
The group is now one of the largest manufacturing conglomerates in sub-Saharan Africa and is pursuing further backward integration alongside an expansion programme in existing and new sectors.
Source: Company Website