Dangote to build world’s largest refinery in Lagos
ON ANY GIVEN weekday, commuters in Lagos, Nigeria’s commercial capital, are snarled in traffic for hours.
Container trucks and tankers take up several lanes of traffic on the major thoroughfares close to the city’s ports. Often these trucks have been parked on the highways overnight.
There is a palpable fear of accidents, or a spill. Much of Lagos is an environmental disaster waiting to happen.
It is here in this vibrant metropolis of 21 million people that Africa’s richest person, Aliko Dangote, is undertaking his most audacious gamble yet. Dangote is building a $12 billion (R177.38bn) oil refinery on 2 500 hectares of swampland that, if successful, could transform Nigeria’s corrupt and underperforming petroleum industry.
It is an entrenched system that some say has contributed to millions languishing in poverty and bled the “giant of Africa” for decades.
Planned as the world’s largest refinery, Dangote’s project is set in a free-trade zone between the Atlantic Ocean and the Lekki Lagoon, an hour outside the city centre. The site employs thousands, and upon completion – Dangote says in 2020; some analysts suggest more likely in 2022 – should process 650 000 barrels of crude oil daily.
That’s enough oil to supply petrol and kerosene to all 190 million Nigerians and still have plenty to export. By the end of this year, the facility is expected to churn out 3 million tons of fertiliser. The production of diesel, aviation fuel and plastics will then follow.
“The construction site is already a huge beehive of activities, with workers, local and foreign, hard at work. It is going to be the largest manufacturing plant of any sort in Lagos,” said Kayode Ogunbunmi, the publisher of City Voice, a Lagos daily newspaper.
Dangote, whose net worth is estimated at $11.2bn, has had to build a port, jetty and roads to accommodate this project, along with new energy plants to power it all.
Nigeria’s government, despite being a long-time crude oil exporter, has four underperforming and frequently broken-down refineries, with a combined capacity of 445 000 barrels daily. Those refineries – two in the oil hub of Port Harcourt, one in Warri in the Niger Delta, and the other in the northern city of Kaduna – are all operating at less than 50 percent of capacity.
Which means that even though Nigeria is Africa’s largest oil producer, petroleum for everyday use must be imported.
This has spawned fuel importers and diesel traders who have grown extremely wealthy. Nigeria’s government subsidises fuel imports to keep pump prices low, and this has contributed to Nigeria’s well-documented culture of petroleum industry corruption.
“The failure to produce refined products over the last 25 years has created a huge architecture of graft and corruption around everything,” said Antony Goldman, the co-founder of the London-based Nigeria specialists ProMedia Consulting.
Goldman does political risk analysis in West Africa and has worked in and out of Nigeria for two decades. Corruption, he explained, stems from illegal refineries and the local criminal network that helps transport illegal crude out of the country.
Both elements, he said, have not been sufficiently challenged by the government or law enforcement agencies, which has further contributed to Nigeria’s entrenched oil industry corruption.
“A refinery that actually works and can meet Nigeria’s refined product requirement? It’s a game-changer,” Goldman added. But change, no matter how positive, is potentially destabilising. “These are not people who relinquish things without a fight,” Goldman said of Nigeria’s fuel import merchants.
Despite creating thousands of jobs, Dangote’s refinery hasn’t been universally applauded in Nigeria. The biggest issue is its Lagos location: The refinery is being built hundreds of kilometres from the impoverished Niger Delta, where the bulk of Nigeria’s oil is extracted.
Two undersea pipelines are under construction in the Delta and will carry crude oil about 547km to the refinery in Lagos. The pipelines will be costly, but also far harder to sabotage than conventional above-ground systems. And security is key in the Delta region, where local rebel groups like the Delta Avengers have kidnapped foreign oil workers and blown up pipelines to protest regional pollution and poverty.
Amid Nigeria’s complex regional tensions, Dangote is the one person, industry experts say, who could achieve a measure of détente in the region.
Yet critics – and Dangote has many – worry that his new refinery will allow him essentially to take over Nigeria’s oil and gas industry. “Why would a nation leave an entire industry in the hands of one company?” they ask.
The “monopoly” question has swirled around Dangote for decades. Twice divorced and currently (and vocally) looking for a third wife, Dangote made his initial fortune operating near-monopolies in cement, flour and commodities across Nigeria, where regulatory oversight is relatively lax. Dangote’s companies, including pasta producers and property management, are found across Africa.
A decade ago, Dangote and other private investors tried and failed to buy the government-owned refineries. He was unavailable for comment, but previously said he does not apologise for his expansionist desires.