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Nigeria: How Dangote re-invented his supply chain

Kelvin Ayebaefie Emmanuel
By Kelvin Ayebaefie Emmanuel

Co-Founder, CEO at Dairy Hills

Posted on Thursday, 9 September 2021 14:44, updated on Tuesday, 14 September 2021 21:29

A view of the Dangote Oil Refinery under construction in Ibeju Lekki district, on the outskirts of Lagos
View of the Dangote Oil Refinery under construction in Ibeju Lekki district, on the outskirts of Lagos, Nigeria July 5, 2018. Picture taken July 5, 2018. REUTERS/Akintunde Akinleye

Nigerian entrepreneur Aliko Dangote believes his use of backward integration could help Dangote Industries Limited save a third on their total operating expenses; the new refinery is a key part of that.

In the year 2016 alone, Dangote Cement Tanzania reported that the company spent $48m at $4m per month for 6 million litres of diesel per month, to power a 3 million metric tonnes cement plant, two thirds of the Tanzania’s market demand for 4.5 million metric tonnes of 42.5 grade cement every year.

The company disclosed that due to the high cost of power they had to stop operations for a while, as it was in the midst of negotiating gas supply contracts with the Tanzanian Petroleum Development Company (TPDC). In Nigeria, at Obajana plant in Kogi State, the company has had to adopt the use of coal (a natural resource that emits a great deal of green house gases and contributes to global warming) for power generation, as a tool to reduce its power bill.

So, when in 2014, the Chairman of Dangote Industries Limited, announced an ambitious goal to build a 650,000 barrels per day processing capacity refinery to produce premium motor spirit, AGO, Jet A1 and other derivatives including petrochemicals for refining Urea, polypropylene and polyethene crystals, one of the major considerations must have been the total cost of power and gas to his daily operations.