Dangote – Refined ambition. How Africa’s richest billionaire is going big

It is almost 3000 hectares of infrastructural colossus that sits on the fringe of Lagos, Nigeria’s commercial capital, along the coast of the Atlantic Ocean; this is the home-grown refinery of home- grown multi-billionaire Aliko Dangote.

This imposing multi-billion-dollar project promising to be Africa’s largest oil refinery and the world’s biggest single-train facility, best described as Africa’s most monumental civil and mechanical engineering project.

With a staggering financial investment of $19 billion, the project’s refinery arm has the capacity to process 650,000 barrels of crude oil per day, satisfying local consumption of over 200 million with more than enough to create a market of at least $11billion of Nigerian crude-a-year.

The facility will easily double Nigeria’s refining capacity by processing a variety of light and medium grades of crude to produce Euro-V quality clean fuels including Gasoline, Diesel, Jet fuel and Polypropylene.

Completion and eventual production will guarantee over $7.5 Billion per Annum Forex Savings from import Substitution and over $5.5 billion per annum Forex earnings from exports.

The refinery complex’s infrastructure facilities include a pipeline system, access roads, tank storage facilities, crude and product-handling facilities. It also has amarine terminal, including a newly developed jetty.

For the visionary behind this epoch-making endeavour, creating a world class state of the art infrastructural facility, was a lot more than yet another blueprint. It is a project the billionaire is under pressure to complete for the sake of the continent.

“This refinery must come on stream it cannot be one of these white elephant half-built factories that sit around the continent. There are many more industrial entrepreneurs across Africa than there were 20 years ago. Not all of them are very good; there are some very badly managed companies out there, there is a lot of great African talent and Aliko inspires a lot of Africans to make a difference,” says a former Dangote employee, who asked not to be named.

“He works 24/7 so it is a different style. He is not the only one who is like that. He has got his own style and way of doing things as we all do. He is a very good guy he is a very humble guy in his own way as well.”

Easily identified as Africa’s wealthiest man, for the tenth consecutive year, magna- industrialist, Aliko Dangote is President & Chief Executive of the Dangote Group, – West Africa’s most valuable conglomerate and one of the largest sector employers in Nigeria. It is also the company, under which the refinery project sits. The Group currently has a presence in 17 African countries and is a cement market leader on the continent. Dangote Cement Plc, a group subsidiary, is the largest listed company in West Africa.

Dangote’s business interests span vast industries including oil and gas, consumer goods and manufacturing with Dangote Cement making up the majority of the conglomerate’s revenue.

On a recent visit to the refinery Dangote spoke of his grand vision

“ This all stemmed from the desire to make my country, Nigeria great. We bought the Kaduna and Port Harcourt refineries in 2007 and then, the government of President Yaradua reversed that transaction. We agreed to the reversal because they believed they could repair the refineries and also continue operating them. After that failed acquisition, in a couple of years, we realized that Nigeria still was not producing its own Petroleum products and decided to have a vision towards addressing the reality of Petroleum products importation. We then went back to the drawing board to design a 300 bpd refinery facility. This soon changed to 450bpd and 550 bpd and we eventually considered a maximum capacity of 650 barrels per day. We also keyed in 840,000 tonnes of Polypropelene and 650,000 tonnes of Polyethylene as a Petrochemical feature. This later birthed the decision to create an industrial complex. Hence, taking up 2800 Hectares of land in Lagos following a negotiation with the State Government and the project began but we faced a lot of challenges as we did not envisage that we would incur some of the costs but we are where we are today and I believe we have achieved quite a lot. We will save quite a lot of money in terms of exports and saving Nigeria from importing Petroleum products”

To gain some more context for this lofty ambition it is worth taking a look at Nigeria’s infrastructural backdrop and oil industry.

Nigeria is the second biggest oil-rich country in Africa, after Libya, with an estimated to hold 37 billion barrels of proven oil reserves.

Yet, the country is dependent on imported refined fuel products because of a lack of domestic refining capacity.

There are currently five refineries in the country of which, four plants are owned by the Nigerian Government through the Nigerian National Petroleum Corporation (NNPC), while the fifth is owned and operated by the Niger Delta Petroleum Resources (NDPR).

Low capacity utilization which developed and still exists today with the plants can be traced to poor governance and maintenance culture, pipeline vandalisation and price control of PMS which accounts for more than 70% of fuel consumption in Nigeria.

The dysfunction of its domestic refineries has long put Africa’s biggest oil producer in a strange position as it exports large volumes of crude to plants overseas, then pays a premium to import the fuel back.

Hence, parallel efforts, backed by private companies, to bolster Nigeria’s capacity.

Impressive as the views of the burgeoning industrial city are, this is a mere microcosm of the blueprint as there is so much more than meets the eye.

The Petrochemical complex has a gas processor, the world’s biggest plant for ammonia and urea and a fertilizer plant that will utilize the refinery’s by-products of raw materials. Giuseppe Surace is Chief Operating Officer on the Petroleum refinery project. For Surace, the Petrochemical complex’s importance cannot be understated.

“The petrochemical here is the largest production of Polypropelene that we are going to have in Africa – almost 900,000 tonnes per annum of Polypropelene. The Beauty of it is that this is what adds and creates the real value of the investment. Any potential expansion will not be necessary on additional liquids but will be on the Petrochemical side. At the initial phase, we will get Polypropelene which is directly integrated with the refinery. This will be closely followed by Polyethylene,” he says.

Polypropylene, a basic plastic for industrial cross-utilization, is a major essential that commands extensive global demand.

The fertilizer plant, built on land clawed back from swamp, had its specific motivations

Edwin Devakumar, Group Executive Director, Strategy, Portfolio Decelopment and Capital Projects at the Dangote Group, sees an urgent need to intensify efforts on fertilizer production

 “We always talk about the agricultutral industry being neglected. It is a misnomer to say that Oil came and the agriculture dropped. When we did the analysis, we realized that the farmers just became impoverished and they abandoned agriculture and so, we identified a few reasons behind this development. One was that fertilizer was not adequately available. As it was primarily being imported and distributed and this involved time constraints too. To address this, we are not just going to produce fertilizer and sell, our vision is to transform the entire Agricultural industry in Nigeria,” he says.

At the fertilizer control centre on the Petrochemical complex, process engineers communicate with the field to ensure that operations run smoothly on the plant. The Ammonia & Urea complex with an annual capacity of 3,000,000 per annum and 8,000 tonnes of Urea per day

Echon Japhet and Ayinla Habeeb are Process and Production Engineers at the fertilizer complex… they are also beneficiaries of a capacity building development programme hosted in India by the refinery project for batches of Nigerian engineers.

“I came in as a graduate engineer and was quite unfamiliar with the plant but following the training we had in India, I have been able to benefit greatly in applying the learnings to my work process,” says Japhet

Habeeb agrees.

“We feel privileged to have joined the training in India and benefitted from the learnings regarding the smooth running of the plant operation”

As with the refinery, the Petrochemical plant project didn’t go without challenges but as operational bottlenecks were circumvented over time through increased capital expenditure.

“The capital expenses on this project had shot up phenomenally compared to a normal Petroleum refinery project. We had to invest a much larger amount of funds due to the unavailability of  certain issues.. Upon selecting the land, we realized that 70% of it was swampy. We had also required a piece of land close to the Sea too. When we started developing, we realise that we lacked adequate Swamp buggies and ended up having to import Swamp buggies on our own- that was an unexpected capital cost. Being a long-term investment and with rising Ocean levels , we decided to raise the height of the entire 2800 Hectares of land by one and a half meters- that was another substantial cost of over 300 million Euros. Once we were ready to move in, we realized that the existing condition of the land would not work due to the sand-filling  and soil condition and so, we had to go for piling. We went for almost 200,000 Pile this is the largest quantum of piling in any single site in the world– yet another cost. Following our engineering designs and then, realized that we did not have adequate aggregate as the quantum of concrete works in the country is quite low. So, we had to open a large granite mine with a capacity of 10 million tonnesper annum. It is today, the world’s largest granite mine. Without all these, this project would not have been progressed at this rate,” Devakumar says.

 Devakumar further cites a lack of concrete producing equipment as none of the existing producers had the capacity for the project. Hence, a need to set up a concrete producing facility of 13 million cubic metres ,another unexpected expense. The list grew longer as the execution of civil works and site buildings also became a challenge due to the project’s scale. The costs and downsides to employing foreign contractors was just as unfavourable, which led  to a decision to purchase 2,400 construction equipment.

Amongst other ancillary features on the site, is a newly developed Jetty. The necessity for which, became heightened in a bid to ease the transportation of massive artillery required for the refinery’s smooth operation. The certified port can berth vessels for import and export – a very welcome feature to address impediments to regional and International Trade but this process was also no walk in the park.

At inception, the entire venture was estimated to cost $9bn, with $3bn in equity from the Dangote Group and $6bn to be raised in loan capital. Way over $15 billion in expenditure now, what were some of the unforseens and how did project completion delays affect investing parties?

“The whole objective is also to make money for the investor” Devakumar says.

“The delay obviously had huge associated costs in relation to interest on investment and all the fixed expenses. Equipment that had been delivered earlier, were also unutilized- an added cost on equipment warranty. The primary delay was due to the manufacturing and the shipping of the equipment from overseas. With the COVID-19 pandemic, came the shutdown of operations and factories” says Devakumar

 Nigeria’s oil and gas sector, the mainstay of its economy, has been largely governed by the Petroleum Act and the Petroleum Profit Tax (PPT) Act, enacted since 1969 and 1959 respectively. Since the enactment of these laws, the global oil and gas industry has changed significantly from an investment, governance and fiscal perspective.

Although certain obsolete aspects of the Acts have been amended, their inadequacies remained evident, contributing to the development of the Petroleum Industry Bill which was first presented to the country’s National Assembly in 2008. Thirteen years later, the long-awaited bill was signed into law by Nigeria President, Muhammadu Buhari, in August 2021 instilling a new investor confidence in the sector.

The Nigerian government is not left out here as the state owned company, The Nigerian National Petroleum Company,( NNPC) is taking a 20% in Dangote’s mega project as they have the right to buy a stake in any refinery processing more than fifty thousand barrels a day.

Nigeria’s Central bank Governor, Godwin Emefiele alongside a delegation, has also paid a special visit to the site, during which, a detailed presentation on the project’s progress and prospects was shared by the Dangote Group Team.

Following this tour, Governor Emefiele expressed his take on the project’s magnitude, measure in place for trade ease as well as the overall multiplier effect for Nigeria’s economy

The good reviews pour in, but as with every venture analysis, what could go wrong particularly in relation to ease of trade as an operational bottleneck and how can this be eliminated

“So many things are involved in relation to the ease of trade and I am happy that this project site also has its own jetty which will receive Crude or Gas. Given the port system’s efficiency, it opens room for trade expansion even after servicing the country. With this project, Nigeria is chesting out and saying : On petroleum products, on petrochemical products, on fertilizer products, we can now sell to you, even to you, an ECOWAS country, in Naira and we begin to see how the Naira can become a currency of trade even along the ECOWAS region. That for me, is an objective that I would like to see happen during my time as Central Bank Governor of Nigeria ” Emefiele says.

Nigeria’s unemployment and underemployment rate is at an all-time high- a grim reality at risk of worsening.

 According to the country’s Bureau of Statistics, unemployment rate peaked to 27.1% in the 2^nd quarter of 2020 from 23.1% in the 3^rd quarter of 2018 with the underemployment rate sitting at 28.6%.

With a labour force of 80.2 million, this means that about 21.7 million Nigerians are unemployed- a figure that exceeds the population of 35 of Africa’s 54 countries. Among young Nigerians aged between 25 and 34, the largest bloc of the labour force, the unemployment rate currently stands even higher, at 30.7%.

At project stage, the refinery generates 70,000 indirect jobs while at operating stage, it will provide 138,000 jobs

The project will also provide 135,000 retail outlets, 26,716 filling stations and 129 depots in Nigeria, while 2,600 trucks to ease transportation will create additional jobs.

The Dangote Group will also enhance infrastructure in host community primary schools and engage in construction of computer training centre for indigenous youth.

“ When we started this project, we did not have a lot local capacity” Dangote says “Sometimes, it is disheartening when one has a place of 70,000 workers with 80% of its workforce made up of foreigners but what we have done now, is to say that we will only take one foreigner for four Nigerians. We achieve this by developing our local capacity. We currently have about 25,000 Nigerian working on this project but the concern about what they will do next also arises. I believe they will all go somewhere and hopefully, with the passage of the Petroleum Industry Bill, Nigeria will become a lot more attractive to majority of the global Oil and Gas companies. We will attract investment opportunities. Our’s is to be the pace-setters and others will follow. Today, we have created a capacity not only to make Nigeria self-sufficient in cement, but to also export” says Dangote.

 So now, to the biggest enquiry on the project…What is its completion date?

“Our target is to reach mechanical completion by the end of this year, which means the factory should be ready to start. It is a very aggressive target but we are focused on this. We will start taking the crude oil in, next year. Simultaneously, we are also trying to do the pre-commissioning. All the tanks have been tested, the meters are now being tested, over the next couple of months, we want to test the entire facility of receiving crude, exporting product and also the loading base. The next will be a focus on testing and commissioning the power plant. So, the primary focus of commissioning will be on the various departments where the crude will flow through till the refined product comes through the storage tank”says Devakumar.

 Dangote leaves us with an invite to the world.

“What I think they need to do is they need to come and see what is going on in Nigeria. The international community sometimes seem to  have a negative perception of the country, but there is also a lot of good news here. We are doing a great deal of good and I urge them to compare and see both sides.”

 If ever there was a monument to the life’s work of an African entrepreneur – Nigeria’s new refinery could be it.

 With additional reporting by: Chris Bishop.