Exclusive-Nigeria dangote in talks with traders for oil refinery loan

LAGOS / LONDON (Reuters) – Africa’s richest man Aliko Dangote is in talks with some of the world’s biggest oil traders to help finance his mega refinery project outside the center Nigerian commercial from Lagos, sources familiar with the matter said.

FILE PHOTO: View of the Dangote Oil Refinery under construction in the Ibeju Lekki district on the outskirts of Lagos, Nigeria, July 5, 2018. REUTERS / Akintunde Akinleye / File Photo

The 650,000 bpd refinery, when completed, will be the largest plant on the continent and will redesign major crude and fuel trade flows in the Atlantic Basin.

Despite being Africa’s largest oil producer and exporter, the country relies almost entirely on imported fuel after allowing its significant refining capacity, 445,000 barrels per day, to deteriorate for several decades.

Many past and current Nigerian officials, including President Muhammadu Buhari, have announced plans to renovate them, but political will has been lacking.

The Natural Resources Governance Institute, a nonprofit political think tank, has previously indicated that dying refineries are a key hotbed of corruption and oil waste in the country.

Struck by the economic consequences of the COVID-19 pandemic and skyrocketing construction costs, Dangote needs an injection of cash.

Nigerian state oil company NNPC has agreed to buy a 20% stake in the refinery for around $ 2.8 billion, but Dangote is looking for outside liquidity. NNPC chief Mele Kyari said a process was underway to raise $ 1 billion from Afreximbank to fund part of its stake.

Just a month ago, the billionaire spoke with executives of the world’s two largest oil traders, Trafigura and Vitol.

Trafigura and Vitol declined to comment. A spokesperson for the Dangote group did not respond to multiple requests for comment.

Two sources with direct knowledge said the option of raising an additional $ 500 million from a trading house or consortium was being actively explored.

Details of a potential loan from a trading company have not been finalized, but the trader may be given a long-term contract to supply crude and receive shipments of refined products as repayment.

The refinery has been delayed for several years, and the cost has climbed to $ 19 billion from Dangote’s earlier estimate of $ 12 billion to $ 14 billion. Construction was also delayed due to outbreaks of COVID-19 among workers at the site and delays in obtaining materials, said two sources with knowledge of the project.

Many industry sources don’t expect any products until the second half of next year.

Swiss traders like Vitol as well as Nigerian companies have cashed in on gas-strapped Nigeria for years by providing mega-tenders and participating in lucrative crude oil-for-fuel swap deals for over. of a decade.

Grabbing fuel from Dangote will give the trader a stranglehold on a key set of new oil streams. Nigeria’s new petroleum bill, approved last month after nearly 20 years of political wrangling, added fuel import license requirements that experts say will give Dangote an effective monopoly.

Under the new laws, the regulator will prioritize local refiners for import licenses and volumes would be based on production capacity or market share.

While Nigeria will theoretically remain open to international trading houses, a partnership with Dangote would be the only way to secure a foothold in Africa’s largest economy.

Reporting by Libby George in Lagos, Julia Payne and Dmitry Zhdannikov in London, written by Julia Payne; edited by David Evans

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