Africa's Richest Man Bets Big on Oil Refinery

December 27, 2013

Drew Hinshaw

LAGOS, Nigeria—Africa's richest man sat barefoot on his new yacht in a lagoon here after another night of about three hours sleep.

The day was filled with meetings about his cement company and preparations for a polio-fighting trip with fellow billionaire Bill Gates. His BlackBerry buzzed every few minutes with messages from the president of Benin, and a former U.S. ambassador wanted some face time.

"You don't see any sign of stress on me," Aliko Dangote said with a tight smile. The 56-year-old businessman said he was getting an energy boost from a weeklong fast that limits him to six glasses of watermelon juice a day.

For two decades, Mr. Dangote (pronounced DAHN-go-tay) has turned his relentlessness, connections and entrepreneurial bets on the rise of Africa into a fortune estimated at about $22 billion.

Most of it comes from his controlling stake in a conglomerate of cement, sugar, salt and noodle factories sprawled across 16 countries. Profits in three publicly traded companies he controls hit $1 billion in the first nine months of 2013, up 43% from a year earlier.

Mr. Dangote now has a plan to quintuple his wealth—and become one of the five richest people in the world. He will spend $9 billion to build the largest privately owned refinery in Nigeria, which produces more oil than any other African country but must import most of the motor fuel and diesel it uses because existing refineries are dilapidated and inefficient.

Within about two years, the new refinery in a stretch of swampy shoreline outside Lagos could start piping in crude from roughly 7 miles offshore, bypassing a traffic jam of tankers often stuck for weeks. Competing against four government-managed refineries that run at barely 20% of their capacity, Mr. Dangote would double the country's maximum refinery output.

The refinery project is a bet that Africa's economy will keep growing much faster than the rest of the world, especially as a wave of consumerism sweeps the continent.

New airlines are taking off so quickly that some jet-fuel sellers, hurt by a shortage, have been caught trying to fill airplane tanks with kerosene instead. Car imports through Nigeria's main port have risen to about 300 cars a day.

As a result, Africa now is the world's fastest-growing oil user, and the International Energy Agency expects oil consumption in Africa to surge about 30% to 4.5 million barrels a day by 2018. The jump represents 15% of the world's projected rise in oil demand.

Mr. Dangote and his supporters, including Nigeria's president, see more than money in the new refinery. To them, it also defies centuries of Africa exporting its most precious resources—including gold, diamonds and humans—rather than putting them to work at home.

Nigeria's government has collected about $1.3 trillion in oil revenue since 1980, according to the Economist Intelligence Unit. Yet about 60% of the country's 170 million people live on less than $1 a day, according to the government. It says as much as 400,000 barrels of oil per day—or one-sixth of total output—are pilfered from pipelines by bandits. Most of the stolen crude is loaded onto barges at night and shipped abroad.

The refinery planned by Mr. Dangote will "change the economic and industrial landscape of Nigeria," said Doyin Okupe, senior special assistant to Nigeria President Goodluck Jonathan. The president thanked the billionaire and his bankers by inviting them to Mr. Jonathan's villa on a day usually reserved for government planning sessions.

The project faces daunting challenges. Competition will be fierce from U.S., Asian and European companies that also want to satisfy Africa's thirst for gasoline and other fuel products. Some energy firms are expanding operations in Africa, and American refineries are gaining an edge around the world as the U.S. shale-oil boom lowers their production costs.

Nigeria also subsidizes imported oil, keeping prices at the gas pump about one-third lower than they are in the U.S.

"I don't know how he's going to do it, but I do know it's going to be very, very tough," said Bismarck Rewane, managing director of Financial Derivatives Co., a research firm in Lagos. He has known Mr. Dangote since they lived near each other in the 1980s and attended middle-of-the-night house parties together.

Despite all his connections, Mr. Dangote hasn't won government approval for a license needed to build the refinery. That is not unusual. From 2000 to 2010, more than 100 refinery construction projects were announced in Africa. Only one was built, according to consulting firm Citac Africa Ltd. Others often fell victim to political interference or high borrowing costs.

"We will get it," Mr. Dangote said about the license. The ministry reviewing the license application declined to comment. Nigeria's next presidential election is scheduled for 2015.

In an interview on his yacht, named Mariya after his mother, the billionaire said his refinery will have no trouble competing because it will avoid Nigeria's costly and congested ports. He hasn't said if it will sell gasoline to retailers for less than they pay now.

He also expects Nigeria to eventually abolish foreign-oil subsidies, which cost the government $6.5 billion last year.

In the past decade, Africa's economy has grown by an average of 5.6% a year, compared with the world-wide growth rate of 3.6% per year, according to the International Monetary Fund. The surge has helped turn some of the richest businessmen in Africa into tycoons.

Africa now has 27 billionaires, up from 16 in 2012 and just two a decade ago, according to Forbes magazine. Those two were white South Africans.

Mr. Dangote was born into wealth. Near the dawn of British colonialism in the early 1900s, his great-grandfather, Alhassan Dantata, cornered the peanut market in drought-prone northern Nigeria. While other Nigerians chafed at colonial rule, Mr. Dantata exported tons of peanuts to feed Europe's growing appetite.

During the oil boom of the 1970s, an uncle of Mr. Dangote gave him a government-issued license to import cement. But few Nigerians had ever heard of him. Mr. Dangote spent much of his time and earnings in Brazil, usually enjoying the Carnival festival before Lent. In the 1990s, a friend talked him into flying to Atlanta, where he bought a house and then swung through every other month for jaunts at nightclubs.

He felt comfortable amid Atlanta's historically black colleges and restaurants, far away from a succession of military coups and botched elections in Nigeria. Startled by a snake in his basement one day, Mr. Dangote sold the house and bought a larger one.

But he started to feel the tug of his homeland, the most populous country in Africa. On trips to Brazil for Carnival, he saw signs of the economic progress the country had made: Desperate hustlers, touts and money changers didn't swarm him at the airport any more. And cement factories were popping up in the mountains.

That gave him an idea to do something big, he said. He flew back to Nigeria, contributed to the upstart People's Democratic Party and made a promise after its presidential candidate won election in 1999. Mr. Dangote vowed to build one of the world's largest cement plants if the government restricted the flow of cement through the country's ports.

The businessman got what he wanted. The limits on imports of cement—the most common building material in Africa—lifted prices to twice the world-wide average. His business empire mushroomed. Dangote Group now makes a two-thirds markup on every bag of cement it sells.

In return, Mr. Dangote spent $1 billion on the cement factory and an adjoining, 1.7 mile-long airstrip, borrowing some of the money at an interest rate of 42%. They opened in 2008, and he vaulted onto the billionaires' list for the first time.

Dangote Group now employs about 25,000 people in Nigeria, is building cement factories in 14 countries in Africa and is buying mining licenses from Kenya to Zambia.

A pop song in Nigeria called "Aliko Dangote Special" includes the line "Cover of Forbes, he no be joke." The motivational book "Dangote's Ten Commandments on Money" cites the billionaire's advice "to make the best of your time because any time lost cannot be regained." No. 8: "Believe in Nigeria."

"It's something he said to me years ago: 'Only Africans will build Africa,' " said Kola Karim, chief executive of oil-exploration company Shoreline Natural Resources Ltd. Mr. Karim sells most of the oil from Shoreline's fields in the Niger River delta to India but would rather do business with Mr. Dangote.

The two men, who are friends, recently talked over the details on a dock next to the billionaire's yacht but haven't announced an agreement. "This is where my future lies," Mr. Karim said. "The market is in Africa."

Mr. Dangote will soon borrow $1.5 billion to lease about 740,000 acres, an area 50 times bigger than Manhattan. He wants to grow sugar and rice for Dangote Group's processing plants.

The area in northeastern Nigeria is swarming with fighters from Islamic insurgency Boko Haram, but the fields will put so many people to work that the insurgents will "leave us alone," Mr. Dangote predicted. Once the farm is thriving, "Boko Haram will not have guys to recruit."

The industrialist nudged Nigerian bankers for more than a year about his refinery plans. Then he started telling them how much they should lend—and at what interest rate.

"When he wants something, he gets it," said Edmund Boyo, a partner at law firm Clifford Chance LLP who worked on the deal.

In September, Dangote Group announced a $3.3 billion syndicated loan from banks led by Standard Chartered of the U.K. and Nigeria's Guaranty Trust Bank PLC. Terms of the $3.3 billion loan weren't disclosed, though he said it includes a penalty if he repays the banks too quickly.

Nowadays, banks sometimes charge him less than 6% interest, he added, a lower interest rate than Nigeria's government gets on its loans.

Yvonne Ike, chief executive of investment bank Renaissance Capital's operations in western Africa, said she has seen bankers' "eyes watering when they thought about how much they had lent" to Mr. Dangote at rock-bottom interest rates compared with other companies. Still, the bankers "couldn't stand not to be a part of the biggest debt deal in Africa," she said.

Mr. Dangote now is trying to line up oil to feed his refinery. Chevron Corp. CVX 0.00% and Royal Dutch Shell RDSB.LN 0.00% PLC are selling oil fields along Nigeria's coast after long battles with kidnappers and pipeline-bombing oil thieves.

The billionaire wants to buy the two companies' tracts of oil-rich swamp. To protect the oil from bandits, he will bury pipelines to and from the refinery. Chevron and Shell declined to comment.

The billionaire hasn't announced any deals to sell the gasoline, plastic and other fuel products that will be made by his refinery.

He likely will have to lure away customers from state-owned oil company Nigerian National Petroleum Corp. It controls the four rundown refineries that dominate Nigeria's oil industry. Government leaders have denounced the company as opaque and unscrupulous.

"It's a waste pipe of corruption," said Ken Saro-Wiwa Jr., a spokesman for Mr. Jonathan, Nigeria's president. An NNPC spokeswoman couldn't be reached for comment.

Mr. Dangote hasn't had a vacation since he took 18 children, grandchildren, nephews and nieces to Walt Disney World in Florida last year. That was his first vacation in 17 years, and he has no plans for another one. The refinery is keeping him too busy.

"If there is anything higher than the national honor that the president gave me two years ago, which I do appreciate very much, then he obviously needs to give me another national honor for building a refinery that we never, ever dreamt about," he said.

The billionaire's private jet was landing in Lagos at 1 a.m. last month when his pilot got a call from air-traffic controllers. Mr. Gates, the Microsoft Corp. co-founder and one of the world's richest men, had just spent two days with Mr. Dangote but was stranded 400 miles away by a broken-down plane.

Mr. Dangote told his pilot to turn around, pick up Mr. Gates and fly back to Lagos. Mr. Dangote got home at 4 a.m. and was at his desk by 7:30.

DISCLAIMER: The purpose of the ICF Newsletter is to compile and share relevant information for its users regarding the investment climate in Africa. The focus of this information will predominantly be on the latest reforms in customs, taxations, commercial justice, business registration and licensing, land registration and relevant events relating to the ICF’s mission.
27 December 2013

Africa's Richest Man Bets Big on Oil Refinery Read More »
18 December 2013

Sub-Saharan Africa lost an estimated 5.7 percent of its GDP over a ten-year period to illicit financial outflows, preventing millions of people in Africa from accessing better health and education, according to a new report by a US-based organization, Global Financial Integrity (GFI). Read More »
13 December 2013

Today the Ethiopian Revenues and Customs Authority (ERCA) and the Investment Climate Facility for Africa (ICF) have signed an Agreement worth US$ 7.3 million to establish an electronic Single Window (eSW) system for international trade. Read More »
12 December 2013

The Ethiopia Commodity Exchange (ECX) is making preparations to introduce online trading that enables market players to participate directly in trade wherever they are. Read More »
05 December 2013

South Africa joins the Infrastructure Consortium for Africa – as the first G20 member. Read More »
01 December 2013

Trade facilitation will be in the spotlight at the Ninth World Trade Organization (WTO) Ministerial Conference in Indonesia in December. A deal, whether in Bali or later, will make it easier for companies worldwide to move their goods across borders. While a multilateral trade facilitation agreement is important for East Africa, the region has already made headway in improving trade facilitation and increasing the competiveness of its exporters. Read More »
29 November 2013

ICT, political will and a continuous reform are among the key factors in ensuring there is an enabling environment for businesses to register and license faster and at a low cost. Read More »
25 November 2013

A project well positioned to become a centre of excellence. That is what William Asiko, ICF CEO, called the Tunisia Stock Exchange Capacity Building project when the ICF senior management team visited it recently. Read More »
31 October 2013

Zambians no longer have to queue at the Revenue Authority offices to process their tax transactions. They can now do it from the comfort of their own homes or offices, provided they have access to the internet. Read More »
30 October 2013

On the 24th to 25th October 2013, the Investment Climate Facility for Africa (ICF) in collaboration with the Registrar of Companies and the Registrar General of Mauritius organized a knowledge sharing workshop on business, land and asset registration in Port Louis, Mauritius. Read More »
24 October 2013

The Investment Climate Facility for Africa in collaboration with the Registrar of Companies in Mauritius has organized a knowledge sharing workshop on business and asset registration 24th- 25th October 2013 in Port Louis, Mauritius. Read More »
18 September 2013

The Government of Sao Tome and Principe, International Finance Corporation and Investment Climate Facility for Africa jointly launched a trade facilitation project at the Praia Hotel, Sao Tome on September 10th 2013. Read More »
15 August 2013

The government of Sao Tome and Principe embarks on a trade project to make it easier and cheaper to import and export goods in Sao Tome and Principe. Read More »
17 June 2013

Businesses in Burkina Faso will soon find it easier to import and export goods thanks to a Customs Procedures Facilitation project being implemented by ICF and the Government of Burkina Faso. Read More »
11 June 2013

On 29th May 2013, the Investment Climate Facility for Africa co-hosted a side event with the African Development Bank (AfDB) in Marrakech, Morocco. Read More »
03 June 2013

Small and medium enterprises are a key driver of economic growth across Africa. Unfortunately, many businesses operate informally due to lack of information, red tape and high costs involved in formalizing a business. Read More »
29 May 2013

On 24th and 25th May 2013 the Kigali Arbitration Centre (KIAC) held a workshop on commercial arbitration in the East Africa Community region. Read More »
24 May 2013

On 20th May 2013, the City of Kigali launched its Online Construction Permit Management Information System (CPMIS). Read More »
21 May 2013

A team from the Zambia Revenue Authority (ZRA) recently conducted a study tour of the Rwanda Revenue Authority (RRA), to learn about their online tax system. Read More »
10 May 2013

The Investment Climate Facility for Africa held its fourth knowledge sharing workshop on project management and accounting in Abidjan, Ivory Coast. Read More »
03 May 2013

The Government of Zambia has modernized its Judiciary, thanks to a collaboration with the Investment Climate Facility for Africa. Read More »
19 April 2013

The Co-Chairs of the Investment Climate Facility for Africa (ICF) are pleased to announce that following an intensive international search, William Asiko will succeed Omari Issa as Chief Executive Officer with effect from 1st May 2013. Read More »
11 April 2013

The Investment Climate Facility for Africa will be holding a Project Management and Accounting workshop in Abidjan, Ivory Cost from the 15th to 17th of April 2013. Read More »
05 April 2013

The Government of Burkina Faso has completed a project with the Investment Climate Facility for Africa which aimed to enhance business and land registration systems. Read More »
28 March 2013

The Government of Mauritius has partnered up with the Investment Climate Facility for Africa to modernize its judicial procedures. Read More »
22 March 2013

ICF is working with the Government of Mozambique to improve service delivery of the tax administration, improve taxpayer education, and facilitate the selection of a portal for tax payers to submit and effect payment of taxes online. Read More »
15 March 2013

Alternative mechanisms for resolving disputes can go a long way in speeding up the settlement of commercial disputes and raising investor confidence. Read More »
08 March 2013

The Government of Rwanda is implementing a project co-funded by the Investment Climate Facility for Africa (ICF) to address challenges businesses experience in their lifecycle such as starting a business, registering secured transactions, and closing a business. Read More »
04 March 2013

The Investment Climate Facility for Africa held its third knowledge sharing workshop on project management and accounting in Johannesburg, South Africa. Read More »
01 March 2013

The Investment Climate Facility for Africa will be holding a Project Management and Accounting workshop in Johannesburg, South Africa between the 27th of February and 1st of March 2013. Read More »
22 February 2013

Today, the Ethiopian Revenue and Customs Authority (ERCA) has brought significant benefits to the business community and Ethiopia’s wider economy through its recently developed e-Tax system. Read More »
15 February 2013

Recently, the Rwandese Supreme Court team conducted a study tour of the Mauritius Supreme Court, particularly the e-judiciary project which is co–financed by the Investment Climate Facility for Africa. Read More »
01 February 2013

Burkina Faso is launching its first commercial courts in the country, thanks to support from the Investment Climate Facility for Africa (ICF) and the World Bank. Read More »
01 February 2013

The private sector in Togo will now enjoy a fast and transparent commercial justice system, thanks to the strengthening of the Court d’Arbitrage du Togo. This arbitration court provides businesses with an alternative method of solving commercial disputes. Read More »
08 January 2013

Senegal now enjoys a paperless customs system, thanks to a fruitful partnership between ICF and the Government of Senegal. This collaboration has helped to streamline and fully automate custom procedures in Senegal. Read More »
Press Contacts

Eunice Urio

Communications Manager
+255 222 129 211
Send an email

Elizabeth Mwambulukutu

Communications Officer
+255 222 129 211
Send an email

Share this page
Browse through our library of resources available for you to download and view.
Activity Map
Use our interactive map to follow all of our projects and activities on the African continent.
Project Application
View and download our project application forms, as well as our procurement guidelines.