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Nigerian enterprise tycoon Aliko Dangote is looking for to boost billions of {dollars} to step up manufacturing at his $20bn oil refinery on the outskirts of Lagos.
The industrialist is in talks with industrial lenders, improvement banks, oil merchants and different business members to boost funds for crude provides to show into refined merchandise, based on folks aware of the matter.
His firm Dangote Industries has purchased crude from the US and Brazil, and in July was in talks with African suppliers similar to Libya and Angola, based on Devakumar Edwin, a senior government on the group.
Africa’s richest man must safe extra crude to succeed in the refinery’s capability of 650,000 barrels per day for a undertaking he has stated is a “recreation changer” for the nation.
The billionaire told the Monetary Instances final month that he anticipated the refinery to be at capability by the second quarter of subsequent 12 months, though earlier targets have typically slipped.
Dangote added that Nigeria’s greatest infrastructure undertaking in many years and the biggest of its form on the planet is already producing 420,000 b/d.
He needs to resolve what he describes as an “absurd” scenario during which Africa’s greatest oil producer imported all of its refined petroleum merchandise due to a scarcity of refining capability.
The plant started producing jet gas and naphtha at the beginning of the 12 months and petrol in September, elevating hopes that Nigeria may lastly finish many years of reliance on imported gas.
It will value about $2bn each 90 days to safe a minimal provide of 300,000 b/d, folks aware of the matter say.
Traders have expressed frustration at Dangote’s incapability to achieve a gradual provide of crude, based on one banker concerned within the fundraising. One other added that there was additionally a serious concern amongst potential financiers over publicity to Nigeria’s forex, the naira, which has fallen sharply following two devaluations over the previous 12 months.
“The refinery might by no means make a revenue in actual phrases,” stated the second banker. “It was constructed over-budget and the naira, which is a serious forex of future income, has devalued massively.”
Dangote final month attended an emergency assembly with President Bola Tinubu and Mele Kyari, head of Nigeria’s state oil firm NNPC, to speak about crude provides.
The billionaire instructed the FT the assembly was to debate “the modalities” by which NNPC would provide 365,000 b/d of crude to his plant to be paid for in naira.
Dangote Industries declined to remark additional on the fundraising or the industrialist’s talks with the president.
NNPC didn’t reply to requests for touch upon the fundraising or assembly.
NNPC has a 7.2 per cent stake within the refinery, which was watered down from 20 per cent after it did not pay the steadiness of a deal price $2.7bn. NNPC paid $1bn upfront in money in 2021 and the opposite $1.76bn was presupposed to be paid for in crude provides.
Many, together with Dangote, have questioned NNPC’s capacity to provide the crude the refinery wants as a result of it has bought important portions of oil on ahead contracts.
Even when NNPC comes by way of with the crude, Dangote would wish one other 185,000 b/d, or greater than 5mn barrels a month, to satisfy his goal of 550,000 b/d by January and extra nonetheless as soon as the refinery reaches full capability.
The Africa Finance Company, a pan-African improvement lender based mostly in Nigeria that’s already an investor within the undertaking, is likely one of the establishments concerned within the talks to boost cash.
The AFC led a financing spherical in December for funds to supply the preliminary capital to get the refinery up and operating as a industrial operation.
The AFC declined to touch upon the discussions over fundraising.
Dangote plans to make use of the refinery to satisfy the nation’s complete petrol demand, which he estimates at 30mn-35mn litres a day. Some critics have accused him of looking for to duplicate a quasi-monopoly he already enjoys in cement.
Refineries generate profits on the unfold or distinction between the value of crude and the cash they make on the refined merchandise they produce.
