AFRICANGLOBE – Just when everyone else was applying the brakes to their investments in Nigeria’s oil industry, Aliko Dangote, Africa’s Richest Man, adds more fuel to his tank and steps on the throttle. The Nigerian media has titled him Nigeria’s saving grace. But despite the economic salvation of Dangote’s latest action, it is still driven by clever business calculations, perpetuated by the shrewd master of the game.
Dangote, this week, told Financial Times he is increasing his $9 billion investment in an indigenous refinery project by $2 billion despite the global oil crises. “Nigeria needs it and Africa needs it,” he said, colouring the move with patriotism for motherland and passion for Africa. While Dangote’s true colours do include a huge ink of patriotism and belief in the African resurgence, his investment is nonetheless a lot more than charity beginning at home. It is a savvy business move with long term benefits that actually are actually worth the risk, and Dangote agrees to this.
Nigeria’s economic saviour….
First, Nigeria’s state-owned refineries are largely ineffective and produce a fraction of installed capacity, making Africa’s largest oil producer the continent’s highest importer of refined oil products. This where Dangote’s refinery project is expected to step in and change the oil landscape of the country. At completion, the facility projected to process about 500,000 barrels of crude daily, that is about a quarter of the country’s total crude production.
A saving grace for the Nigerian economy, the project will significantly slash fuel imports, reducing the expenses on petroleum imports and eliminating costly rackets associated with subsidies and crude oil swaps. Thus, much of the billions of dollars made from crude oil exports could be used to develop other sectors of the economy.
… is also Among the biggest gainers of his salvation
But there are also big wins for the $25 billion worth business mogul; his facility, which will have the largest refining and petrochemical plants in Africa, is situated in Lekki Free Trade Zone, meaning a lot of the taxes and charges that normal firms labour with are cut off his expenses book. A more important win for him will be a new sector domination just like his firm grip on cement manufacturing in Nigeria since much of the country’s petroleum products will now come from his facility.
And his decision to invest more in the refinery despite the attendant risks, has valuable benefits. Dangote told the Financial Times that his company, the Dangote Group, had already raised nearly two-thirds of the initial foreign currency requirement needed for the project before the naira began to slide on weaker world oil prices, meaning his investment dodged the currency crash. And because the devaluation of the Naira increased dollar costs and caused oil players to slow down or suspend projects, it will reduce the sector’s construction cost to the benefit of Dangote’s refinery project.
And he saw it all coming
“We as a group have seen this coming,” Dangote said in the interview, explaining that by the time the plant, which is partly being financed with a loan from the central bank, is up and running “we won’t require a single dollar from the Central Bank of Nigeria. . . . With our export-orientated goods including cement, fertiliser and petrochemicals, we will be earning as much as $9 billion annually.”
Even though he acknowledges the broader negative economic impact of the falling oil price, Dangote describes the oil revenue crises as a blessing in disguise, enthusing that Nigeria will have to work harder to grow the non-oil sector of the economy, something that is desperately needed for the development of the country. However, you cannot but notice that one of the most significant players in Nigeria’s non-oil sector is Aliko Dangote himself.