Cement mogul to build Nigeria’s first private oil refinery
Continent’s richest man aims to corner market
AFRICA’S richest man, Aliko Dangote, plans to launch Nigeria’s first private oil refinery by 2019 while almost doubling his cement production on the continent by adding plants in eight countries as he shrugs off a regional economic downturn.
Dangote said the $12-billion (about R179-billion) refinery would have a capacity of 650 000 barrels a day, cornering the market in Africa’s most populous country, where fuel shortages are a constant problem.
Until recently, Nigeria was Africa’s biggest crude oil producer, but it imports 80% of its fuel. Its four refineries never reach full output because of poor maintenance. Its daily consumption is 260 000 barrels, according to the International Energy Agency.
A slump in commodity prices has hammered Nigeria’s economy and raised the cost of borrowing, but Dangote, whose business empire stretches from cement to flour and pasta, is pushing hard into oil and gas.
“It will be ready in the first quarter of 2019,” the billionaire founder of Dangote Cement said of the refinery.
“Mechanical completion will be end of 2018 but we will start producing in 2019,” he said.
Dangote said the plant, which will include a $2-billion fertiliser unit, was being funded through “loans, export credit agencies and our own equity”.
Some $3.25-billion had come from local and foreign banks, while the central bank had also chipped in. The International Finance Corporation, the private sector arm of the World Bank, has lent $150-million.
Dangote also has plans for a gas pipeline through West Africa. Nigeria has the world’s ninth-largest proven gas reserves, at 187 trillion cubic feet, but loses half of it to flaring and re-injection.
Despite the new focus on oil and gas, he plans to build cement plants in Cameroon, Ethiopia, Kenya, Mali, Niger, Nigeria, Senegal and Zambia by 2018. Another plant will open in the Republic of the Congo by September, he said.
A cement plant in Ivory Coast would triple output to three million tons, up from an initial target of one million, he said.
Two new plants in Nigeria would add six million tons annually.
“As at now, what we have in operation is about 45 million tons, so we have just another 40 million tons to go,” he said, affirming an Africa production target of 85 million tons a year by 2018.
The collapse in oil prices has hit Nigerian companies hard, with many unable to access dollars because of central bank foreign exchange restrictions imposed to prop up the naira, the Nigerian currency.
The worst affected have gone to the wall or shed large numbers of staff, but a study by Reuters of an 11-week period in March to May showed that Dangote firms managed to secure a healthy share of dollars at the cheap official rate.
Dangote said the $161-million bought during that period from the central bank merely reflected the size of his business and did not represent preferential treatment.
“We have been badly affected like any other company,” he said, arguing that operational costs totalled $100million each month due to recurring expenses such as the purchase of parts for cement production and running a fleet of 9 000 trucks.
“When you are talking about $20billion worth of projects, what is $161million? One-hundred-and-sixty-one million dollars is my six weeks’ need,” he said.
Dangote’s sugar refinery in Nigeria had reduced capacity by 15% as a result of the dollar crisis. “We ended up owing a lot of dollars,” he said.
This week, the central bank removed the peg that has held the naira at the official rate of 197 naira to the dollar for the past 16 months, leading to a 30% devaluation.
Dangote said the decline had pushed up costs.
“This devaluation alone, we have lost over 50-billion naira (about R2.7-billion),” he said.
“The gas, which is our main source of power, is priced in dollars. If there is a 40% devaluation, your price will go up by 40%.
“Every single aspect of the production will go up by that percentage,” he said.
Dangote also said he was eyeing a listing on the London Stock Exchange “within the next year or two”. —
When you are talking about $20-billion, what is $161-million?