Aliko Dangote, Africa’s richest man, has revealed plans to invest $8 billion to build an oil refinery in Nigeria by 2016. The refinery will be able to produce about 400,000 barrels per day.
The country currently has the capacity to produce some 445,000 barrels per day among four refineries, but they operate well below that owing to decades of mismanagement and corruption in Africa’s leading energy producer.
Nigeria has two refineries in its main Port Harcourt oil hub, one in the Niger Delta town of Warri, and one in Kaduna in the north that serve 170 million people. Not one of them functions at full capacity.
Nigeria currently depends on subsidized imports for about 80% of its fuel needs. “This will really help not only Nigeria but sub-Saharan Africa. There has not been a new refinery for a long time in sub-Saharan Africa,” Dangote said.
Dangote said the country’s ability to import fuel would soon be challenged. “In five years, when our population is over 200 million, we won’t have the infrastructure to receive the amount of fuel we use. It has to be done,” he said.
Past efforts to build refineries have often been delayed or canceled, but analysts have said Dangote should be able to build a profitable Nigerian refinery, owing to his past successes in industry and his strong government connections.
Analysts have said previous attempts to get refineries going have been held back by vested interests such as fuel importers profiting from the status quo. Dangote said this concerned him.
“The people who were supposed to invest in refineries, who understand the market, are benefiting from there being no refineries because of the fuel import business,” he said. “Some … are going to try to … interfere.”
Dangote said making a new refinery run at a profit would work even if the government failed to scrap the subsidized fuel price that has deterred others from investing.
“We’ve done our numbers and the numbers are okay.”