The Dangote Refinery is making efforts to raise billions of dollars to ramp up crude oil supplies for the $20 billion oil refinery.
This is according to a report by British newspaper, Financial Times.
The report quoted sources familiar with the matter to have said that owner of the refinery, Aliko Dangote is in discussions with commercial banks, development lenders, oil traders, and other stakeholders to secure funding for crude procurement.
It further said Dangote Industries has already sourced crude from the US and Brazil, and in July initiated talks with African suppliers, including Libya and Angola, as revealed by Devakumar Edwin, a senior executive at the group.
To reach the refinery’s full capacity of 650,000 barrels per day, Africa’s richest man needs a steady and expanded crude supply.
Securing a minimum supply of 300,000 barrels per day would cost approximately $2 billion every 90 days, according to sources.
Investors have reportedly grown frustrated over Dangote’s difficulties in securing a consistent crude supply, with concerns also raised about exposure to Nigeria’s volatile naira, which has sharply devalued following two currency adjustments in the past year.
“The refinery may never make a profit in real terms,” one banker involved in the fundraising said, citing its over-budget construction costs and the naira’s depreciation as significant challenges.
In an emergency meeting last month with President Bola Tinubu and Mele Kyari, head of Nigeria’s state oil company, NNPC, Dangote discussed how the NNPC could supply 365,000 barrels per day of crude, to be paid for in naira.
However, concerns linger over NNPC’s ability to meet this commitment, given its forward sales of significant oil volumes.
Even with NNPC’s full supply, Dangote would still need an additional 185,000 barrels per day—more than 5 million barrels monthly—to reach 550,000 barrels per day by January, and even more, once the refinery reaches full capacity.
The report said the Africa Finance Corporation (AFC), a pan-African development lender and an existing investor in the project, is among the institutions engaged in fundraising discussions.
The AFC previously led a financing round in December to secure initial capital for the refinery’s commercial launch but declined to comment on current efforts.
Dangote aims to meet Nigeria’s entire petrol demand, estimated at 30-35 million litres daily.
Refineries generate profit through the margin between crude oil prices and the revenue from refined products, which remains a critical factor for the refinery’s long-term viability.
