In 2017, ibe kachikwu said we needed $1.2b to fix ALL FOUR refineries.
but in 2020, the NNPC is investing $2.7b in one man's business...
#OurMumuNevaDo

AUG 10, 2021
Africa's Richest Man,
Dangote May Forfeit Refinery Project To Nigerian
Debt Recovery Agency Over Rising Debts, Long Delay

With the refinery now projected to commence operations in 2025, Dangote Group’s indebtedness to financial institutions is estimated to hit $8.4 billion by 2025.
BY SAHARAREPORTERS, NEW YORK

Dangote Oil Refinery, which is reputed to be
Africa’s biggest oil refinery, may soon run
into a deep financial crisis as a result of a $7
billion debt burden – a situation which
indicates a possible takeover of the project
by the Assets Management Corporation of
Nigeria (AMCON).
Dangote Refinery is an oil refinery owned by
the Dangote Group that is under construction
in Lekki, Nigeria.
Dangote Group is a Nigerian multinational
industrial conglomerate, founded by Aliko
Dangote, Africa's richest man.
The Group's interests span a range of sectors
in Nigeria and across Africa.
According to an analysis by the Money
Management Series, Dangote Oil Refinery, a
650,000-barrel per day (BPD) integrated
refinery project under construction in the
Lekki Free Zone, Lagos, Nigeria, was
expected to commence production in 2016
with $3.3 billion financing secured in 2013.
With the refinery now projected to commence
operations in 2025, Dangote Group’s
indebtedness to financial institutions is
estimated to hit $8.4 billion by 2025.
Presently, this debt burden has risen to $7
billion with debt servicing of almost $700
million per annum.
The completion date of the refinery has been
moved eight times.
Whilst some might say this is not in the
character for Dangote Industries and their
numerous projects across different sectors,
the problem is deeply rooted.
A contractor at the delayed refinery project,
speaking under the condition of anonymity,
said that poor planning, underpayment of
contractors, and a lack of proper project
management with over 40 contractors on site
have led to most of the delays. He also
added that of the 40, none is willing to
commission as there is no clear delegation of
duty and over-decentralisation leading to
absolute chaos.
With these incessant delays, some financing
banks are already calling in their loans amid
fears of liquidity crisis, while others are
elated by the guarantee of huge interests to
be recouped as soon as the refinery comes
on stream.
Dangote has been able to restructure the
facilities from various local and international
banks twice so far, but most banks have
totally refused to restructure for the third time
with principal repayment also falling due as
well as the annual interest payments.
The Nigerian National Petroleum Corporation
(NNPC) has made available $3.8 billion as
part of federal government’s 20% equity in
the project, providing $1 billion cash, while
the remaining $2.8 billion will be in crude
supply.
However, analysts have pointed out that
NNPC’s 20% equity at $3.8 billion makes the
Dangote refinery overvalued at $19 billion.
When Aliko Dangote unveiled early plans for
the refinery in September 2013 and
announced that he had secured about $3.3
billion in financing for the project, the refinery
was estimated to cost about $9 billion, of
which $3 billion would be invested by the
Dangote Group and the remainder via
commercial loans, and begin production in
2016.
However, after a change in location to Lekki,
construction of the refinery did not begin until
2016 with excavation and infrastructure
preparation, and the planned completion was
pushed back to late 2018.
In July 2017, major structural construction
began, and Dangote estimated that the
refinery would be mechanically complete in
late 2019 and commissioned in early 2020.
Experts, however, posit that the construction
would likely take at least twice as long as
Dangote publicly stated, with refining
capability not likely to be achieved until 2025.
Meanwhile, last week the Minister of State for
Petroleum Resources, Timipre Sylva,
reiterated that Federal Executive Council
(FEC) approved the acquisition of 20 per cent
minority stakes by the NNPC in the Dangote
Petroleum and Petro-Chemical Refinery.
Sylva, while briefing State House
correspondents after the virtual FEC meeting
presided by Vice President Yemi Osinbajo
last Wednesday at the Presidential Villa, said
the acquisition was in the sum of $2.76
billion.
“The Executive Council also approved the
acquisition of 20 percent minority stakes by
the NNPC in the Dangote Petroleum and
Petro-Chemical Refineries in the sum of
$2.76 billion,” he said.
This development has been described by
industry observers as strange because $2.76
billion falls short of 20 percent of the
Dangote project valued by the sponsor at $16
billion. Using the $16 billion value, 20
percent should be $3.2 billion and analysts
have expressed dissatisfaction at the
disparity in the project’s value and NNPC’s
funding.
Speaking with MMS Plus on the complexities
with funding Dangote refinery, the Managing
Director of Cowry Assets Management, Mr.
Johnson Chukwu, argued that the banks
wouldn’t have any challenge from the
financing because Dangote would have to
pay the interests.
“I don’t see the banks being unable to meet
their liquidity because of the monies tied
down in the Dangote refinery. Ultimately, if
the investment is economically viable, when it
starts operation it should be able to meet up
the arrears. I believe the banks that went into
this project understood some of these
constraints and didn’t break their balance-
sheets in the move to finance Dangote
refinery. I don’t envisage any bank having a
liquidity challenge as a result of investing in
Dangote refinery. If there is any challenge it
would come from Dangote, but it should be
resolved when the project takes off,” he said.
Commenting on the possibility that NNPC
over-valued or under-valued the project in its
20% equity, Chukwu opined that NNPC may
be looking at an enterprise valuation while the
other value could be the net value.
“The enterprise value could be higher than
the amount Dangote has invested in the
project. However, I wasn’t involved in
determining that, so anything I say will be
purely speculative,” he said.
Despite the massive support of the Nigerian
government on the refinery project, things
have got so bad for the billionaire that even
income from his other businesses may not
be enough to cover the interest rates, let
alone the principal.
The $8.4 billion debt represents 75% of
Dangote’s net worth at $11.1 billion and
Africa’s richest man has to seek innovative
ways to prop up his business now as the
refinery project continues to be consistently
delayed.

OPINION
The Dangote Paradox By Moses E. Ochonu
5 Years Ago 0 Comments
BUSINESS
Cement War: Dangote, Ibeto Continue Legal
Tussle


http://saharareporters.com/2021/08/10/africas-richest-man-dangote-may-forfeit-refinery-project-nigerian-debt-recovery-agency

Dangote is simply a bullish businessman... Now, skepticism is building up about the refinery.

Shey the refinery is dey for lekki? If so make una no worry laslas e go still open.

FG will pay for the debt, because they are the one who gave him go-ahead.

He has monopoly in the downstream sector and will make that money in one year.

swaggerjack:
He has monopoly in the downstream sector and will make that money in one year.

He will enjoy a near monopoly advantage in midstream refinery and distribution,not in Upstream crude oil drilling and extraction nor in Downstream sector where the likes of Ardova and Oando are the Kings

FreeStuffsNG:


He will enjoy a near monopoly advantage in midstream refinery and distribution,not in Upstream and Downstream where the likes of Ardova and Oando are the Kings

Thanks for the correction, I meant to say midstream.

A whole Africa richest man is taking loans to establish a refinery.
I thought i-go-die said in one of his jokes that if Dangote want to cash a cheque in a bank that the bank will go bankrupt?

dawnomike:
Dangote is simply a bullish businessman...

lol
that refinery is the biggest and costliest mistake of his life.
just watch and see.