Dangote Group said on Tuesday it will borrow $3.3 billion to build a $9 billion oil refinery and petrochemical complex in Nigeria, Africa’s most populous nation and top oil producer.
The Nigerian group, with interests ranging from cement to basic food processing to oil and gas, also said it was seeking a further $2.25 billion from development funds for the project, into which it would put $3.5 billion of its own equity.
The loan will be signed with financiers on Sept. 4, it said in statement. The owner of the group, Africa’s richest man Aliko Dangote, divulged plans for the refinery in April.
The Dangote Group makes up 30 percent of Nigeria’s bourse.
Dangote told Reuters then that the refinery would have a capacity of around 400,000 barrels a day by late 2016, almost doubling Nigeria’s refining capacity.
“We are not resting on our oars,” group spokesman Anthony Chiejina said, adding that the complex, including petrochemical and fertilizer plants, “could be the single largest contribution to this government’s economic transformation agenda”.
Nigeria now has the capacity to produce some 445,000 barrels per day among four refineries, but they operate well below that owing to decades of mismanagement and corruption.
Nigeria relies on subsidized imports for 80 percent of fuel needs. Along with power shortages, lack of refining capacity is among the major brakes on Africa’s second biggest economy. Sorting it out would boost growth and save on fuel import bills.
But it would be bad news for European refiners and oil traders who make huge profits bringing in the gasoline.
Past efforts to build refineries have been delayed or cancelled, but analysts say Dangote should be able to build a profitable Nigerian refinery owing to his past successes in industry and his strong government connections.
A major disincentive to investment in Nigerian refineries is the regulated price of fuel, which keeps pump prices well below market prices at huge cost to the country’s treasury.
Dangote says the refinery will still be profitable, although industry experts say that would only be the case if the government guarantees crude supplies at well below the market rate – or subsidizes his end-product.
[Reuters]