Aliko Dangote takes a deep breath, before reflecting on the odyssey of building Africa’s largest oil and gas refinery. “This is a very, very big relief,” says Dangote, who is speaking with Forbes via video conference from an office space at the refinery. Between remarks, the tycoon waves away employees off-screen vying for his attention. “It is actually removing something off my chest,” he continues, as if speaking with his therapist. “Because nobody ever gave us the chance to prove this through.”
After 11 years, $23 billion in investment and innumerable headaches, the Dangote Refinery finally began operating last year. Located on a sprawling 6,200-acre campus in Nigeria’s Lekki Free Zone about an hour outside Lagos, the refinery processed around 350,000 barrels of crude per day (b/d) in the second half of 2024. In January, it processed 500,000 b/d. At full capacity, which is expected next month – a whopping 650,000 b/d – the Dangote Refinery will be the seventh largest refinery in the world by production and the biggest in Africa. Its adjacent petrochemical complex has an annual production capacity of 3 million metric tons of urea, making it Africa’s largest fertilizer producer.
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Dangote’s refinery is already impacting global energy markets. Imports of gasoline into Nigeria are on pace for an eight-year low, affecting the European refiners that traditionally sold to Nigeria, according to energy intelligence firm Vortexa. And thanks to the refinery, Nigeria has become a net exporter of jet fuel, naphtha (a solvent used in varnishes, laundry soaps, cleaning fluids) and fuel oil, according to S&P Global.
With his project coming to fruition, Dangote is now worth an estimated $23.8 billion—almost double what he was worth last year. (He insists he’s even richer). Already Africa’s wealthiest person, the 67-year-old Nigerian moves back into the ranks of the top 100 richest since 2018, according to Forbes’ Real-Time Billionaires List.
It seemed not long ago that Dangote’s refinery might never come on line. In late 2023, some observers expressed doubt the plant would even work. Even once operations began early last year, Dangote struggled to source crude oil from the Nigerian National Petroleum Corporation (NNPC), Nigeria’s all-important state-owned oil company, threatening the project’s financial viability.
Dangote says the refinery is part of a larger mission: He wants to make Nigeria, one of the world’s largest producers of crude, into a producer of refined petroleum products to allow it to compete with European refineries and supply gasoline to Nigerians. Prior attempts by the Nigerian government to build and operate large-scale refineries ended in failure, leaving Nigerian consumers and businesses reliant on petrol imports, mostly from Europe. Until recently a fuel subsidy kept gasoline affordable for consumers, but the program has strained Nigeria’s finances and been mired in corruption allegations. Billions of dollars were siphoned off by regulators and middlemen over a period of decades in a scheme that disincentivized maintenance of state-owned refineries, many of which sit idle or in a state of disrepair. “The advent of the Dangote Refinery is transformative for the dynamics of Nigeria’s energy market,” says Clementine Wallop, an Africa analyst at Horizon Engage, a geopolitical consulting firm.
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Dangote wants to provide a blueprint for industrialization across Africa. “We have to build our own nation by ourselves. We have to build our own continent by ourselves, not [rely on] foreign investment,” he says. Africa has been “a mere dumping ground for finished products,” Dangote argues, and his refinery represents “a pivotal step in ensuring that Africa has the capacity to refine its own crude oil, thereby creating wealth and prosperity for its vast population.”
In Nigeria, that hasn’t happened yet. In fact, gas prices have increased 60% in the African nation over the last six months as Dangote’s refinery has ramped up production, according to market intelligence firm Trading Economics. (And that’s before accounting for the country’s inflation, which was 29% in December.) The driver of these cost increases is the elimination of Nigeria’s fuel subsidy, which President Bola Tinubu cut after assuming office in May 2023. Doing so was made possible because of the hope of Dangote’s refinery, but it didn’t last long. The subsidy was quickly reinstated after petrol prices tripled. Tinubu slashed the subsidy again last summer, causing prices to skyrocket a second time. Nigerians are especially sensitive to gas prices, as many businesses and households depend on fuel-powered generators, given the country’s unreliable electric grid. Protesters have taken to the streets of Lagos and other cities to vent their frustrations about increasing gas prices.
Dangote blames the state-owned Nigerian National Petroleum Company (or NNPC), which oversaw Nigeria’s fuel subsidy and which both produces crude and sells refined petrol products. Initially, the NNPC agreed to acquire a 20% stake in Dangote’s refinery with an upfront payment of $1 billion, but later trimmed its stake to about 7% and demanded some of its money back. The NNPC also committed to supply Dangote with 300,000 barrels of crude oil per day, but has failed to fulfill its obligation. The NNPC did not respond to a request for comment.
In September, Dangote sued the NNPC in an attempt to block it from continuing to import and sell refined petrol products, citing a 2021 law requiring domestic producers of crude to supply enough oil to local refineries to meet domestic demand. (That case remains ongoing). The NNPC began supplying Dangote’s refinery with crude in October, but said last month that it may reduce its allocation. Dangote is unsparing in his criticism of the organization, which he says is part of his country’s “oil mafia.”
“The oil mafia are more deadly than the one in drugs, because with the oil mafia there are so many people that are involved,” says Dangote. “You might be wining and dining with them, but these are the guys that are really the masters of moving things around.” An anti-graft commission raided Dangote’s office a year ago, but he insists that he’s on good terms with President Tinubu. “We have an extremely, very good relationship. I’ve known him for a very long time,” he says.
While Nigerians are upset with economic conditions, most are not mad at Dangote. “He is seen in most parts of Nigeria as a hero,” says Zainab Usman, director of the Africa Program at the Carnegie Endowment for International Peace. “He is seen as a real industrialist who builds things.”
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Born in 1958 to a wealthy family of traders in the city of Kano, Dangote always had ambition. He began his business career on the school playground at age 8 when he parlayed his allowance into a small-time confectionary venture. “I would use it to buy sweets, and I would give them to some people to sell, and they would bring me the profit,” Dangote toldForbes back in 2015. After studying business at AlAzhar University in Cairo, he established an import-export trading venture in Lagos with the help of a $500,000 loan from an uncle. Political connections helped the young entrepreneur win “exclusive import rights in sugar, cement, and rice,” said a State Department cable unearthed by WikiLeaks.
In the late 1990s, Nigeria’s rulers began promoting domestic industry as the country transitioned from years of military rule into a democracy. Dangote capitalized on the change, securing tax incentives to build a sugar mill, flour refinery and cement factory. The cement business has been especially lucrative, generating gross margins of over 60% most years. (Prior to the opening of the refinery, publicly-traded Dangote Cement, of which Dangote owns 86%, accounted for the largest piece of his fortune.) As his empire grew, Dangote maintained goodwill with successive regimes, in large part because of his conglomerate’s focus on consumers. “I think he’s believed staunchly in the fact that Nigerians need products that he has to offer,” says Chika Ezeanya, a professor of African studies at Soka University of America. “Governments can come and go, policies can be changed, but the needs of the Nigerian consumer will only grow and expand.”
When Dangote first announced his refinery in 2013, his plan was to build the plant in southwest Nigeria. Dangote bought refinery technology from Honeywell UOP, a division of the American conglomerate, and brought in engineers from Engineers India Ltd., a state-backed engineering consulting firm, to help design the massive plant. His longtime lieutenant, Edwin Devakumar, a former World Bank engineer, was put in charge. The projected cost was around $10 billion. “It was the biggest risk of my life,” says Dangote about his decision to embark on the project. “If this didn’t work, I was dead.”
After three years of delays due to disputes with local officials, Dangote abandoned his plans to build on the original site. He forked over $100 million to Nigeria’s government to acquire land in its current location outside of Lagos, but due to that site’s swampy conditions, he had to dredge 65 million cubic meters of sand and construct a port to move it all. Along the way, construction displaced thousands of people, prompting local backlash. Then Covid hit, delaying and complicating the schedule. “I can spend the whole day telling you about these challenges,” Dangote sighs.
The costs accumulated—in part because Dangote kept insisting on making the refinery bigger than originally planned. He took out $5.5 billion in bank loans and sold off 3% stakes in his cement business to Dubai’s investment corporation and an Australian sovereign wealth fund in 2013 for about $300 million apiece; he later sold off other slices to private equity firm Gateway Partners and others for undisclosed sums. An intercompany loan for $10 billion from his holding company – which owns his cement, flour and sugar businesses – helped fund the refinery’s years of cost overruns. The total tab of nearly $23 billion was more than double initial projections.
The refinery still has about $3 billion in outstanding debt. In August, Fitch downgraded its rating on the publicly traded bonds due to “significant deterioration in the group’s liquidity position” following the refinery’s under-utilization last year due to lack of crude, as well as the plummeting value of Nigeria’sNaira, which has lost over 70% of its value against the dollar since June 2023 when Nigeria’s, central bank floated the currency. Dangote says that liquidity is not a problem, and that the refinery is sufficiently dollarized (meaning that his foreign customers pay in U.S. dollars) to withstand the Naira’s devaluation.
Facing these challenges, Dangote is determined to make the refinery a success. He has set up a family office in Dubai and his three daughters work for the family business in various capacities, yet most of his focus is still firmly in Nigeria, not on succession planning. The billionaire says that he still spends a lot of his time at his refinery, meeting with engineers and managers. Plus there are more challenges ahead—including building a subsea pipeline to transport natural gas from the Niger Delta to Lagos, and doubling output at the refinery’s fertilizer plant. He also says he wants to take the refinery public in the next year or two.
“I’ve been fighting battles all my life,” Dangote says, “and I have not lost one yet.”
(Forbes)
