By Adedapo Adesanya
The biggest crude oil refinery in Africa, Dangote Refinery, is seeking to raise capital to ramp up production at the 650,000 barrels per day facility in Lagos.
According to Financial Times, the refinery, operated by Africa’s richest man, Mr Aliko Dangote, is negotiating with a mix of commercial lenders, development banks, oil traders, and other key industry players to raise the necessary funds to ensure a stable and sustained crude oil supply for the refinery.
The $20 billion facility, which produces petrol, diesel, and other fuels, has not been able to operate at maximum capacity due to several limitations.
The refinery has been touted to change the country’s energy use by eliminating the need to import petroleum products.
Dangote Refinery, which began production earlier this year, is already producing 420,000 barrels per day and has set a new target to reach full capacity by mid-2025.
In September, the plant started producing jet fuel and naphtha, followed by petrol production in October.
However, financing challenges have led to delays in meeting previous targets.
It has also faced hindrances from the Nigerian National Petroleum Company (NNPC) Limited, the country’s state-owned oil corporation, which is supposed to supply a significant portion of the crude needed.
NNPC’s stake in the refinery has been reduced to 7.2 per cent after it failed to meet the payment schedule for a deal valued at $2.7 billion.
The state oil firm paid an initial $1 billion in 2021, but it has not been able to cover the remaining $1.76 billion, which was to be paid in crude supplies.
Dangote Industries has already procured crude from international suppliers in the US, and Brazil, and is exploring deals with African nations like Libya and Angola to meet its growing demand.
In recent meetings, Dangote sought assurances from President Bola Tinubu and Mele Kyari, the CEO of NNPC, to ensure a reliable supply of 365,000 barrels per day of crude, to be paid for in Nigeria’s increasingly devalued currency, the Naira.
In December 2023, the Africa Finance Corporation (AFC), a pan-African development bank already invested in the refinery, led a financing round to help the project get off the ground.
However, as the refinery’s production ramps up, Dangote is now faced with the challenge of securing additional funds to cover both crude procurement and the refinery’s operational costs, which could reach approximately $2 billion every 90 days for a minimum supply of 300,000 barrels per day.
With Nigeria’s weak currency, there have been worries that the refinery will face increased challenges.
One of the sources quoted by the publication said, “The refinery was built over budget, and the Naira, which is a major currency of future revenue, has devalued massively.”
However, Dangote said it remains committed to using the refinery to meet Nigeria’s entire demand for petrol, which he estimates at 30 to 35 million litres per day.