Africa's Richest Man to Take on Challenge of $8 Billion Nigerian Refinery

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The latest in a long list of oil refinery project plans for Nigeria has come from Alkio Dangote, Africa's richest man, whose company is a continental player in the cement and food sectors. Ironically, Africa's largest oil-producing nation has to import 80% of its fuel due to a lack of domestic refining capacity. Most of the country's recently proposed refining projects never reached construction.

Last week, Dangote said that he will invest $8 billion in a refinery that will have a daily capacity of about 450,000 barrels and will be in operation by the end of 2016.

Currently, Nigeria has a nominal installed refining capacity of 450,000 barrels per day from four refineries, but none of them are running anywhere near capacity after years of neglect, poorly executed maintenance programs, and outright corruption.

Fuel imports are subsidized to the benefit of European refiners and local dealers. The latter group sometimes skims the subsidies and is known to benefit from the lack of local refining resources, creating a situation in which corrupt schemes can flourish. Over a period of two years, $6 billion was lost in a fuel subsidy scam.

For related information, see February 27, 2013, article - Lagos Refinery could be 'Wishful Thinking' as Nine Other Nigerian Projects Stall.

Dangote said that 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."

Industry analysts say that Dangote, with his successful industrial background, government connections, and personal fortune of $16.1 billion (from $2.1 billion in 2010), should be able to make the refinery project happen.

"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," he said.

Dangote told This Day that making a new refinery run at a profit would work even if the government failed to scrap the subsidized fuel price that has deterred others from investing."We've done the numbers and the numbers are OK," he said.

Work on the refinery is planned to start this year, but to date the proposed site has not been announced.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.