The chairman of the Dangote Group, Aliko Dangote, revealed that his company wasn’t granted any government incentives when building the multibillion dollar refinery, which has a 650,000 barrel per day (bpd) capacity. The majority of the Refinery’s funding came from private sources in the form of debt and equity investment. Africa Export-Import Bank (Afreximbank), Africa Finance Corporation (AFC), China Exim Bank, Guaranty Trust Bank, Standard Chartered Bank, and other domestic and foreign financial institutions took the lead in the Loan financing. Dangote Group and additional private Investors contributed the equity financing.
As one of the biggest private projects in Africa, the Dangote Refinery has a total estimated Investment of $19 billion. Dangote Group owns 67% of the refinery, followed by other private investors at 5% and NNPC at 7.2%. With the state-owned NNPC holding a minority ownership, this financial structure makes the Dangote Refinery largely private in ownership and management. Previously, the Nigerian National Petroleum Company Limited (NNPC) reportedly owned had a 20% ownership of the Dangote Petroleum Refinery and Petrochemicals Free Zone Enterprise (DPRP FZE)
Progress of the project was dragged down by government red tape.
However, NNPC reportedly only owns 7.2% of the Dangote Refinery currently because it missed the deadline of June 2024 to pay the remaining portion of the approved acquisition price. In order to pay for loan repayments, Dangote Refinery also intends to sell a 12.7% interest in 2024. In an effort to meet Nigeria’s domestic demand for refined products and lessen its reliance on imports, the Nigerian government is modernizing and expanding the capacity of refineries run by NNPC, and Dangote’s integrated complex project has given a boost towards achieving the self-sufficiency goal.
On several occasions, the Dangote Group chairman expressed his displeasure with the Nigerian government for not supporting his refinery project. The chairman has pointed out that the refinery encountered a number of difficulties, especially with regard to infrastructure, regulations, and administrative roadblocks. He emphasized how difficult it has been to navigate Nigeria’s bureaucracy and regulatory framework. The project’s progress was dragged down by government red tape, delays in approvals, and inefficiency in getting vital permissions, he added.
Inadequate adequate foreign exchange burdens the project.
While the government provided some regulatory relief and Tax breaks, Dangote criticized the absence of direct funding or Subsidies for such a large-scale national project. He pointed out that governments in other nations typically assist these kinds of massive industrial projects more directly, either by offering larger financial incentives, grants, or upfront infrastructural investments. On occasion, he has criticized the Nigerian government for inconsistent policies that have the potential to impact significant investments. He noted that the project’s planning and execution were made more difficult by uncertainties brought about by changes in government laws or delays in the implementation of policies, such the eagerly anticipated Petroleum Industry Act).
Another major obstacle highlighted by Dangote was the difficulty in obtaining foreign exchange to purchase essential equipment and supplies for the refinery. He lamented that the initiative was further burdened financially by the government’s incapacity to supply adequate foreign exchange at rates that were competitive. In order to ensure the new facility’s success, the federal government had committed to providing the refinery with feedstock made of crude oil in addition to other necessary but unspecified contributions.
Related Article: Nigeria to sell crude oil to Dangote in Naira
Support for the privately funded project is being shown amidst the government’s expectations that, once operational, the refinery will generate more foreign direct investment to Nigeria and that the facility will play a significant role in reducing Nigeria’s dependency on fuel imports to meet domestic demand. Programs like the Pioneer Status Incentive (PSI), which offers Tax Holidays to eligible industries, and the Free Trade Zones, where businesses benefit from lower taxes and customs charges, were primarily used to manage these tax incentives.