Africa’s richest man, Aliko Dangote, is working to raise billions of dollars to expand operations at his $20 billion oil refinery near Lagos. The facility, touted as the largest of its kind in the world, is expected to transform Nigeria’s reliance on imported fuel by producing refined petroleum locally.
Efforts are underway to secure funding from commercial banks, development institutions, oil traders, and other partners to ensure a steady supply of crude oil. The Africa Finance Corporation (AFC), a key investor in the project, is reportedly involved in the talks, having led a financing round in December to support the refinery’s transition to commercial production.
The refinery, which began producing jet fuel and naphtha earlier this year and petrol in September, is currently operating at 420,000 barrels per day (bpd). To reach its full capacity of 650,000 bpd, Dangote is sourcing crude oil from both international suppliers, such as the United States and Brazil, and African nations like Libya and Angola.
Despite its progress, the project faces challenges, particularly in securing sufficient crude supplies. Dangote has been in discussions with the Nigerian National Petroleum Company Limited (NNPC) to obtain 365,000 bpd, with payments to be made in naira. However, concerns have arisen over NNPC’s ability to meet this commitment due to its financial constraints and prior obligations under forward oil contracts.
Additional crude imports will be necessary to bridge the gap, with industry insiders estimating costs of around $2 billion every 90 days to secure a minimum supply of 300,000 bpd. The project is also grappling with the impact of the naira’s devaluation, which has increased financial strain and raised doubts about the refinery’s profitability in the short term.
If successful, the refinery could significantly reduce Nigeria’s reliance on imported fuel, lower domestic fuel prices, and position the country as a fuel exporter, potentially increasing competition in global markets. Experts, however, caution that full operational capacity may not be achieved until 2025.
Reports indicate that the ongoing crude supply issues, combined with economic challenges such as inflation and high import costs, could delay the refinery’s impact. With the government’s removal of fuel subsidies already leading to higher fuel prices, there is growing concern over potential political unrest if these issues persist.
The Dangote refinery remains a critical part of Nigeria’s vision to strengthen its oil industry and economy. However, the success of the project will depend on addressing the immediate challenges of crude supply, financing, and economic stability.
