Nigerian billionaire Aliko Dangote is actively seeking billions of dollars in funding to ensure a steady supply of crude oil for his $20 billion refinery on the outskirts of Lagos. The refinery, one of the largest infrastructure projects in Africa, is designed to meet Nigeria’s petrol demand and reduce the country’s reliance on imported refined petroleum. However, Dangote is facing challenges in securing consistent crude supplies, a critical factor for the refinery to operate at full capacity and achieve long-term profitability.
Funding Challenges and Crude Supply Needs
According to a Financial Times report, Dangote is in talks with commercial banks, development lenders, oil traders, and other stakeholders to raise funds for crude procurement. The refinery, which is projected to process up to 650,000 barrels per day once fully operational, needs to secure a minimum supply of 300,000 barrels per day to maintain operations. Securing this amount of crude would cost an estimated $2 billion every 90 days.
While Dangote Industries has already sourced crude from countries such as the United States and Brazil, it has also initiated discussions with African suppliers, including Libya and Angola. However, investors are reportedly frustrated with Dangote’s struggles to secure a stable and consistent crude supply. There are also growing concerns over Nigeria’s volatile naira, which has significantly devalued in the past year, posing a financial risk to the refinery’s operations.
One banker involved in the fundraising effort expressed skepticism about the project’s financial viability, citing over-budget construction costs and the naira’s depreciation as substantial challenges to the refinery’s profitability. The fear is that the refinery might struggle to generate real profits, despite its large-scale operations.
Emergency Meeting with President Tinubu
In a bid to address the crude supply issue, Dangote held an emergency meeting with President Bola Tinubu and Mele Kyari, the head of Nigeria’s state oil company, NNPC, last month. The discussions centered around how NNPC could supply 365,000 barrels per day of crude oil, to be paid for in naira. However, there are concerns about NNPC’s ability to meet this commitment, especially given the company’s forward sales of significant oil volumes.
Even if NNPC is able to fulfill its part of the agreement, Dangote would still need an additional 185,000 barrels per day—or more than 5 million barrels per month—to meet the refinery’s target of 550,000 barrels per day by January 2025. As the refinery ramps up to its full capacity, the need for a steady and reliable crude oil supply becomes even more pressing.
Role of the Africa Finance Corporation
The Africa Finance Corporation (AFC), a pan-African development lender and existing investor in the Dangote Refinery project, is reportedly involved in the ongoing fundraising efforts. The AFC had previously led a financing round to secure initial capital for the refinery’s commercial launch but has declined to comment on the current fundraising activities.
The AFC’s role highlights the importance of development finance in supporting large-scale infrastructure projects like the Dangote Refinery, which are critical for addressing the energy and refining needs of the African continent.
Dangote Refinery’s Impact on Nigeria’s Fuel Supply
Once fully operational, the Dangote Refinery is expected to meet Nigeria’s entire petrol demand, which is estimated at 30-35 million litres daily. This will significantly reduce Nigeria’s reliance on imported refined petroleum, a situation that Dangote has long criticized as an “absurd” reality for Africa’s largest oil producer. The refinery began producing jet fuel and naphtha earlier this year, with petrol production starting in September 2024. Currently, the refinery is operating at 420,000 barrels per day, and Dangote has stated that it is on track to reach full capacity by the second quarter of 2025.
The refinery is already selling petrol to local marketers and NNPC, which has helped to reduce Nigeria’s dependence on fuel imports. However, the sustainability of this supply and the long-term profitability of the refinery depend heavily on securing a consistent and affordable crude supply.
Aliko Dangote’s refinery is a transformative project for Nigeria and the broader African continent, offering a potential solution to the region’s fuel import dependency. However, the challenges of securing adequate and consistent crude oil supplies remain significant. Dangote’s discussions with various stakeholders, including commercial banks, oil traders, and government agencies, are crucial to ensuring the refinery’s success. Additionally, the ongoing volatility of the naira and concerns over Nigeria’s oil sector present further hurdles. With the support of institutions like the Africa Finance Corporation, Dangote’s refinery could play a pivotal role in reshaping Nigeria’s energy landscape in the coming years.
