The largest oil refinery in Africa

The project of the largest oil refinery in Africa, “Dangote” in Nigeria, is awaiting a financial boost to complete construction operations, and the launch date will be announced soon.

Nigeria’s Dangote Industries Ltd. “Dell” plans to issue a local bond worth 750 million dollars, to finance part of the requirements to complete the refinery.

A recent report by the international credit rating agency “Fitch” indicated that the richest man in Africa, the largest shareholder in the largest oil refinery in Africa, Aliko Dangote, will have to raise an amount of $1.1 billion, to finance the completion of the project.

The Fitch report indicated that Aliko Dangote does not have the necessary funds to make the Dangote refinery operational in 2023.

Dangote Refinery Financing

The pockets of the Nigerian businessman, the richest African, Aliko Dangote, lacked the necessary liquidity to complete the refinery project, so he will resort to borrowing again by offering bonds in the local market, to provide part of the required financing, according to Business Insider Africa.

Dell and Dangote Fertilizer Limited are committed to repaying the loan to Africa’s largest oil refinery, through a $750 million bond offering, representing more than 50% of the financing needs.

In its report, Fitch expected that Dell would resort to selling part of its assets in a cement or petrochemical plant, to provide the necessary financing, in the event that the company failed to issue bonds, due to market problems.

“If the bond offering is not successful, it is unlikely that the current lenders to the largest oil refinery in the continent will grant it more loans to provide financing, so Dell will have to sell a share of its shares in the cement plant or other subsidiary projects,” the report said.

Governance and Transparency

The largest oil refinery in Africa
Aliko Dangote on a previous tour while inspecting construction operations at the refinery

A recent report by Fitch said that the Nigerian company Dell, which has the largest stake in the Dangote refinery, lacks governance and transparency in its management, and that it has control over operations, as the largest shareholder.

The global credit rating agency described Dell’s corporate structure as “complicated”.

“We believe that Aliko Dangote’s control of a controlling stake in the refinery is an additional risk to weak governance and transparency in the company,” she said.

Fitch expected, however, that Africa’s largest oil refinery would reap strong revenues, diversifying the sources of income for Dell, which owns the largest stake, and enabling it to quickly pay off its debts.

Once the Dangote refinery is up and running, the Fitch report said, it will generate annual gross revenues of around $1 billion – before taxes and depreciation – and increase in 2024.

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The Dangote refinery has a production capacity of 650,000 barrels per day.

In January, two reports from Financial Drifts and the Center for Private Enterprise Promotion (CBPE) predicted that the operation of the Dangote refinery in Lagos would improve the economic growth of the African country.

Last year, the Nigerian government announced that the refinery would start operating in 2022, after the national oil company purchased 20% of its shares, at a value of $2.8 billion, but it would not happen before 2023, according to the latest announced data.

The concerned authorities have repeatedly announced the start-up of the largest oil refinery in Africa, since the project was revealed in 2013, despite the delivery of most of the main units in 2019.

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