NewsWest AfricaGetting real in Nigeria


Posted on Monday, 21 October 2013 16:37

Getting real in Nigeria

By Patrick Smith in Abuja

Aliko Dangote gets miked up to tell Nigeria: business is in charge. Photo©ReutersNigerian governments seem to be echoing the advice of China's Deng Xiaoping three decades ago: "Let some people get rich first." President Jonathan is lauding the plan of Aliko Dangote, the country's leading capitalist, to borrow billions to fund an oil refinery and fertiliser plant. If it works, it may launch an industrial revolution.


For a country used to talking about itself in superlatives as well as defying international expectations, Aliko Dangote's $9.3bn refinery and petrochemical plant is just what Nigeria ordered.

It would be, according to its quiet sponsor, "the largest industrial complex in the history of our great nation".

So its launching ceremony in Abuja on 4 September may be hailed as the day when the Nigerian economy changed. And the business brain behind the project may prove to be the man who fixed Nigeria, in more ways than one.

That is one reason why the stars of the political and business firmament turned out to welcome this project.

On the dais alongside Dangote, the host, were vice-president Namadi Sambo, central bank governor Lamido Sanusi, oil minister Diezani Alison-Madueke, GTBank managing director Segun Agbaje, fuel importer Femi Otedola as well as the governors of Edo, Bauchi, Anambra and Ondo states.

This time it was clear that business was in charge. Nigeria has been spending billions of dollars on importing fuel, fertilisers and plastics it could be making itself and exporting to the economies in the region.

There is an opportunity to lead the way in a $50bn-per-year regional market. Yet it is an investment risk that few foreign companies were prepared to take.

The lead finance is to come from the Dangote Group, which is putting up $3.5bn of the equity investment. It has also secured a $3.3bn syndicated loan coordinated by Nigeria's GTBank and London-based Standard Chartered Bank. Another $2.3bn is due to come from development finance institutions.

The central bank will be lending about $300mn for the project at a discounted rate, announced governor Sanusi.

"We have no problem in subsidising productive investment that will earn or save foreign exchange," he said before more orthodox bankers could raise an objection. "It's subsidising unsustain- able imports for consumption that we are opposed to," he said.

Sanusi's point gets to the heart of Dangote's bet, and the difficult politics behind it.

The launching of this new refinery with a capacity of 450,000 barrels per day comes just 18 months after a national crisis, sparked by mass protests against the government's attempt to end fuel subsidies, which was costing as much as $10bn per year.

Fake claims

Since then the treasury has audited some N1trn ($6.1bn) of subsidy claims and found about a quarter of them to be questionable, economy minister Ngozi Okonjo-Iweala told The Africa Report. It has also recovered about N14bn from fake claims.

But the viability of Dangote's project does not rely on ending the subsidy. "Obviously the demand is there, the gap is there," says Okonjo-Iweala. "I think Dangote is a hard-headed businessman. Whether we remove the subsidy or we don't remove the subsidy, I'm sure he's done that calculation."

A previous $25bn Chinese project to build several refineries did flounder, precisely because the politics matters – the fuel subsidy skews the business plan.

Dangote's advantage is that his refinery – sitting midway between the country's biggest city, Lagos, and the oil-producing Niger Delta – will have a ready domestic market and will not have to pay shipping and demurrage costs.

Presumably, as a Nigerian company, it will be a preferred fuel supplier to the government and the big companies. There is a bigger strategic concern, Dangote told the•••

To continue reading, get a copy of the October, 2013 edition of The Africa Report, on sale at newsstands, via our print subscription or our digital edition.

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