Aliko Dangote, Africa’s richest man, is seeking to raise
billions of dollars to step up crude oil supplies for his $20 billion oil
refinery in Lagos, Financial Times (FT) is reporting.
According to the report on Sunday, the Dangote Group founder
is in talks with commercial lenders, development banks, oil traders, and other
industry participants to raise funds for crude supplies to turn into refined
products.
The publication added that the Africa Finance Corporation
(AFC), a pan-African development lender in Nigeria that is already an investor
in the project, is one of the institutions involved in the talks to raise
money.
Financial Times said in December 2023, the AFC led a
financing round for funds to source the initial capital to get the refinery up
and running as a commercial operation.
Quoting people familiar with the matter, FT said it would
cost the Dangote refinery about $2 billion every 90 days to secure a minimum
supply of 300,000 barrels per day.
A banker involved in the fundraising told the publication
that investors have expressed frustration at Dangote’s inability to gain a
steady supply of crude.
Another banker added that there was also a major concern
among potential financiers over exposure to Nigeria’s currency, the naira,
which has fallen sharply following two devaluations over the past year.
“The refinery may never make a profit in real terms,” the
second banker told FT.
“It was built over-budget and the naira, which is a major
currency of future revenue, has devalued massively.”
According to FT, Africa’s richest man needs to secure more
crude to reach the refinery’s capacity of 650,000 barrels per day for a project
he has said is a “game changer” for the country.
The report said the billionaire, in October, said he
expected the refinery to be at capacity by the second quarter (Q2) of 2025,
although previous targets have often slipped.
“Dangote added that Nigeria’s biggest infrastructure project
in decades and the largest of its kind in the world is already producing
420,000 b/d,” the report said.
“He wants to resolve what he describes as an ‘absurd’
situation in which Africa’s biggest oil producer imported all of its refined
petroleum products because of a lack of refining capacity.”
Devakumar Edwin, a senior executive at the group, also told
Financial Times that in July, the refinery bought crude from the United States
and Brazil, and was in talks with African suppliers such as Libya and Angola.
BACKGROUND
Earlier this year, Dangote refinery commenced production of
diesel and aviation fuel.
On September 5, after several back on forth, the company
officially commenced the production of petrol, raising hopes that Nigeria could
finally end decades of reliance on imported fuel.
However, in October, some controversy erupted over crude
supply which led to Dangote attending an emergency meeting with President Bola
Tinubu and Mele Kyari, the group chief executive officer (GCEO) of Nigeria
National Petroleum Company (NNPC) Limited.
The billionaire had said the meeting was to discuss “the
modalities” by which NNPC would supply 365,000 barrel per day (bpd) of crude to
his plant to be paid for in naira.
On the other hand,
NNPC has a 7.2 percent stake in the refinery, a cut from 20 percent
after it failed to pay the balance of a deal worth $2.7 billion.
The NNPC paid $1 billion upfront in cash in 2021 and the
other $1.76 billion was supposed to be paid for in crude supplies.
Speaking on its reason for the change in stake, NNPC
explained that the plan was to invest in compressed natural gas (CNG).
On November 1, the Independent Petroleum Marketers
Association of Nigeria (IPMAN) said petrol from the refinery was more expensive
compared to buying from other sources.
After several back and forth, the association said agreement
had been reached and the the refinery would sell petrol at N940 per litre and
N990 per litre to its members, when purchased using ships and trucks,
respectively.
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