The Dangote Refinery is seeking to raise billions of dollars for crude oil imports to meet production demands, according to recent reports.
This development follows last month’s launch of the naira-for-crude deal, which facilitated the initial supply of four crude oil cargoes to the refinery.
A report by Financial Times on Sunday, citing sources familiar with the matter, revealed that Aliko Dangote, Chairman of Dangote Group, is in talks with commercial banks, development finance institutions, oil traders, and other stakeholders to secure funds for crude oil supplies. These supplies are needed to sustain the production of refined products.
An official involved in the discussions disclosed that approximately $2 billion would be required every 90 days to ensure a minimum supply of 300,000 barrels per day (b/d).
The report highlighted the need for additional crude oil to reach the refinery’s full capacity of 650,000 b/d. This project has been hailed as a “game changer” for Nigeria’s energy sector.
Earlier this year, Devakumar Edwin, a senior executive at Dangote Group, disclosed that the refinery had purchased crude from the United States and Brazil. By July, discussions were underway with African suppliers, including Libya and Angola, to enhance supply volumes.
Last week, the refinery signed an off-taker agreement with the Independent Petroleum Marketers Association of Nigeria (IPMAN) to lift petrol, diesel, and other refined products directly from the facility.
The plant, which began producing jet fuel and naphtha earlier this year and petrol in September, has raised hopes that Nigeria could reduce its dependence on imported fuel.
However, according to a banker involved in the fundraising efforts, investors have voiced concerns over Dangote’s difficulty in securing a steady crude supply. Another financier expressed apprehension about exposure to Nigeria’s naira, which has depreciated significantly following two devaluations in the past year.
“The refinery may never make a profit in real terms,” the banker warned. “It was built over budget, and the naira, a key currency for future revenue, has depreciated massively.”
The Africa Finance Corporation (AFC), a pan-African development institution already invested in the refinery, is participating in the current fundraising efforts. The AFC had previously led a financing round in December to provide initial capital to commercialise the refinery.
Last month, the government, through the Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency, agreed to supply crude oil to the refinery in naira for six months, pending further review. This arrangement was confirmed by sources to Petroleumprice.ng, with crude oil, an internationally priced commodity, still pegged in dollars.
Nevertheless, stakeholders, including Dangote, have expressed doubts about the Nigerian National Petroleum Company Limited’s (NNPC) ability to meet the refinery’s crude requirements. Significant volumes of crude oil have already been committed through forward contracts.
Even if NNPC delivers, the refinery would require an additional 185,000 b/d—equivalent to over five million barrels per month—to achieve its goal of 550,000 b/d by January, and even more when operating at full capacity.
NNPC holds a 7.2% stake in the refinery, reduced from an initial 20% after failing to fulfill the balance of a $2.7 billion deal. While NNPC paid $1 billion upfront in 2021, the remaining $1.76 billion was to be covered with crude oil supplies.
Neither Dangote Industries nor the NNPC has commented further on the fundraising efforts or discussions with the Nigerian president.
