Aliko Dangote, President of the Dangote Group, has revealed ambitious plans to list the fertilizer and petrochemical business of the Dangote Refinery on the stock exchange in the first quarter of 2025.
This announcement comes at a time when the refinery, Africa’s largest, is grappling with significant challenges in securing a steady supply of crude oil.
During a media briefing at the Dangote Refinery, Aliko Dangote emphasized the importance of involving Nigerians in the ownership of the refinery and its associated businesses.
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“Because of the nature of the business we have, both the refinery and the fertilizer, we are targeting end of this year but it depends, most likely, worst case we will be able to list them before the end of first quarter of next year, so that we will sell shares and Nigerians will buy.” Dangote stated
This move follows recent reports that Dangote plans to pursue dual listings of the refinery on both the London and Nigerian stock exchanges. Dangote has a history of listing many of his businesses, such as Dangote Cement, which is currently the most capitalized company in Nigeria with a market valuation exceeding N11 trillion.
The refinery has previously held stakes by entities like the Nigerian National Petroleum Corporation (NNPC). However, Dangote revealed on Sunday that the state-owned company holds only a 7.2% stake in the refinery, not the 20% that was previously reported.
The Dangote Refinery, positioned as Africa’s largest oil refinery and the world’s largest single-train facility, is poised to transform Nigeria’s oil industry. Situated in the Lekki Free Trade Zone, this state-of-the-art facility boasts a production capacity of 650,000 barrels per day (bpd).
The refinery includes a 900 ktpa polypropylene plant, a 36 ktpa sulfur plant, and a 585 ktpa carbon black production unit. It features a total storage capacity of 4.5 billion liters, ensuring Nigeria’s crude and gasoline requirements for 20 and 15 days, respectively.
After completing its test run in January 2024, the refinery transitioned to steady-state production by March 2024. Production is set to increase to 500,000 bpd by August 2024, 550,000 bpd by the end of the year, and reach its full capacity of 650,000 bpd by the first quarter of 2025. Gasoline production is expected to commence in July 2024, with sales starting in August. The annual revenue from the refinery is projected to exceed $26 billion.
Crude Oil Supply Challenges
Despite its advanced infrastructure and ambitious targets, the Dangote Refinery faces a significant hurdle: securing a consistent supply of crude oil. The inability of the NNPC to provide adequate crude has forced the refinery to look beyond Nigerian borders. As a result, the Dangote Refinery has begun sourcing crude oil from international markets, including the United States, Brazil, and other countries.
However, sourcing crude oil from international markets has logistical and financial implications for the refinery. While the refinery is expected to reduce the cost of petroleum products in the country, analysts have warned that importing crude oil means higher transportation costs and longer lead times, which can disrupt production schedules and increase the overall cost of refining. These additional costs are likely to be passed on to consumers, potentially impacting the price of petroleum products in Nigeria.
Moreover, analysts have pointed out that relying on international crude suppliers exposes the refinery to global market fluctuations and geopolitical risks. Any disruption in supply chains, such as political instability in supplier countries or changes in international trade policies, could adversely affect the refinery’s operations.
In response to these challenges, the Dangote Refinery has made strategic adjustments to its operations. The facility’s configuration has been optimized to minimize the production of low-value products and maximize the output of more profitable crudes and products. This flexibility allows the refinery to adjust its production based on the quality and cost of the crude oil available, thereby enhancing its economic viability.
Additionally, the large-scale operation of the refinery helps to reduce production costs and enables it to serve a vast market efficiently. By leveraging economies of scale, the Dangote Refinery aims to maintain competitive pricing despite the higher costs associated with importing crude oil.
The listing of the refinery and its associated businesses on the stock exchange is expected to provide a significant boost to the company’s capital base. The influx of investment from public shareholders is expected to enable the refinery to expand its operations, invest in new technologies, and possibly secure more stable sources of crude oil in the long term.