Africa’s richest man plans to “change the game” in the oil market

Africa's richest man plans to
Image: Youtube / Gates Foundation

Aliko Dangote is the richest man in Africa and with his new $ 15 billion project he could revolutionize the economy of his native Nigeria, as well as “change the game in the oil market.”

In fact, this sum exceeds his own fortune, which amounts to just $ 13.5 billion and would go towards the construction of one of the largest oil refineries in the world. If successful, Dangote could end one of Africa’s greatest ironies, where the continent’s largest crude producer is forced to import $ 7 billion worth of fuel a year, instead of meeting its own needs and as well as its neighbours.

The operations of this refinery would add about $13 billion to the country’s economy, which constitutes 2.3% of the GDP, according to the estimates of Renaissance Capital. In addition to direct profits, the project would employ some 70,000 people. Thus, this refinery would become the largest industrial project in the history of the country. It will also have the largest distillation column in the world and the petrochemical complex will have a gas processing plant and the largest plant in the world to process ammonia and urea, which are used to make plastics and fertilizers.

This will not be Nigeria’s first attempt to have its own fuel industry. Thus, in the 70s this country already opened several state refineries, but these had to be closed because they were working at a fraction of their capacity. Dangote himself has made several attempts: in 2007 he bought one of the state refineries, but the new government was quick to revoke the privatization.

The new refinery would be of great importance for the country, since 90% of its profits in foreign currencies come from the sale of crude oil, which plummeted in 2020 due to the price war, followed by the coronavirus pandemic. As a result, since March, the national currency has been devalued twice, and the International Monetary Fund forecasts a 5.4% drop in economic growth for this year.

At the start of operations, the plant is expected to produce about 100,000 barrels per day, which “could change the rules in regional supplies,” says Jeremy Parker, an analyst at London consulting firm Citac. It should be borne in mind that the project appears at a difficult time: there is a lot of competition in a market that is affected by the collapse in crude oil prices. In fact, profit margins for refineries are at their lowest point since 2010, says Patrick Pouyanne, the president of Total SA, adding that they are “absolutely catastrophic.”

Another challenge that Dangote would be facing would be the cartels that have been dominating the oil business in this African country for the past two decades. This natural resource has been a good source of profit for individuals with good political connections and has served as a motivation to keep local refineries inoperative.

So far, the project has already been delayed several times. In particular, it was planned to be inaugurated in 2016, and later in 2019. Now, due to the complications experienced by the coronavirus, the start-up of the plant has been postponed until 2023.