Ondo State is likely to be the lucky recipient of the $8bn refinery proposed by Africa’s richest man and President, Dangote Group, Alhaji Aliko Dangote, as he intends to site it in the Olokola Free Trade Zone in the state.
This was disclosed by a senior official of the company, who asked not to be named because he was not authorised to speak on the matter.
According to the source, factors such as having the biggest deep seaport in the country, being an oil-producing state and proximity to other big industries made Ondo a favourite to host the refinery.
The source added that stable crude oil supply was also a vital element in the choice of the location for the refinery because Chevron and a number of other oil producers had oil fields in the oil-rich region of the state.
He added that Lagos was not chosen despite it being a coastal state because pipelines would have to be built to transfer crude from oil fields to the refinery, which would incur additional expenses.
The source explained that necessary approvals had been secured for the refinery, adding that the Dangote Group was just waiting for the necessary equipment with which to build the refinery to arrive.
Another source told our correspondent that Dangote, who was listed on Monday as the first African entrepreneur to lay claim to a $20bn fortune and one of the 25 richest men in the world, would put down $4bn of his personal fortune to build the refinery, while international financial institutions had raised the balance.
Dangote had in April announced plans to invest up to $8bn in building an oil refinery with capacity for around 400,000 barrels a day by late 2016 which would almost double Nigeria’s current refining strength.
“This will really help not only Nigeria but sub-Saharan Africa. There has not been a new refinery for a long time in sub-Saharan Africa,” Dangote had told Reuters in a telephone interview.
Nigeria currently has the capacity to produce some 445,000 barrels per day in four refineries, which operate well below that owing to decades of mismanagement and corruption in Africa’s leading energy producer.
The country relies on subsidised imports for 80 per cent of its fuel needs.
Dangote said the country’s ability to import fuel would soon be challenged.
“In five years, when our population is over 200 million, we won’t have the infrastructure to receive the amount of fuel we use. It has to be done,” he said.
Past efforts to build refineries have often been delayed or cancelled, but analysts have said Dangote should be able to build a profitable Nigerian refinery, owing to his past successes in industry and his strong government connections.
Analysts have said previous attempts to get the refineries going were held back by vested interests such as fuel importers profiting from the status quo.
“The people who were supposed to invest in refineries, who understand the market, are benefiting from there being no refineries because of the fuel import business. Some are going to try to interfere,” Dangote said.
He said making a new refinery run at a profit would work even if the government failed to scrap the subsidised fuel price that has deterred others from investing.
“We’ve done our numbers and the numbers are okay,” he said.
Dangote, who spoke on the sidelines of the recent World Economic Forum on Africa in Cape Town, South Africa, said he had secured $4.25bn loans from banks to build the refinery.
He said the loan was secured from “two offshore banks and some Nigerian banks.”