Olufemi Adeyemi
African billionaire Aliko Dangote has reached new heights of wealth with the successful launch of his long-anticipated oil refinery in Nigeria. However, his demeanor reflects that of someone who has constructed their ideal home only to discover significant issues with the roof.
The Dangote Refinery, located near Lagos, stands as the largest single-train oil refinery globally and is among the most intricate, designed to process a wide variety of crude oil types. This facility has the potential to revolutionize Nigeria’s economy by enabling the nation to achieve fuel self-sufficiency. Furthermore, it has significantly increased his net worth to $27.8 billion, as reported by the Bloomberg Billionaires Index.
He remarked that he would not wish the challenges he faced on even his worst adversary.
“I didn’t know what we were building was a monster,” Dangote, 67, said during a recent visit to New York. “The pressure was coming from different directions, people confusing us, disturbing us every day with different media stories that it will never work, it will never work, it will never work.”
Since the refinery commenced operations in January, it has faced disputes with the government and the state oil company, alongside worries regarding its effects on local communities and the environment. Dangote is feeling the repercussions, with his demeanor shifting from optimistic to resentful as he outlines the obstacles encountered.
For Dangote, who amassed his initial fortune in the cement industry, the refinery represents the most ambitious project of his 46-year career. The construction spanned 11 years and cost $20 billion, significantly exceeding both the time and budget originally anticipated. He financed the majority of this endeavor independently.
Unmatched Scale
Dangote, characterized by his short stature and neatly groomed graying hair, is an industrialist of unmatched scale. His business empire is primarily built on commodities, including cement, sugar, salt, and flour. His wealth stands out in a nation where 40% of the population lives below the poverty line, and significant wealth is often associated with oil interests.
While critics label him a politically-connected monopolist, he takes pride in his contributions to Nigeria’s manufacturing sector. Prior to his ventures, Nigeria was heavily reliant on cement imports, a fundamental component for developing markets. Now, the country has transitioned to being a net exporter of cement. With the refinery, he aimed to replicate this success in the oil sector.
However, he quickly encountered challenges. The initial location for the refinery was abandoned after four years of negotiations with local authorities over land disputes. Dangote relocated the project to Lagos state, where he faced further opposition from residents who were to be displaced, some of whom are still awaiting full compensation.
The new site was predominantly swampy, necessitating extensive dredging, reclamation, and elevation by nearly 5 feet (1.5 meters) to mitigate flooding risks from rising sea levels. Dangote’s holding company undertook the construction of a dam, established its own port, developed a large granite quarry, and acquired 332 cranes.
Two years into the construction phase, the onset of Covid-19 disrupted operations. Several suppliers faced bankruptcy, leading to a project lockdown that required all workers to remain on-site. During this period, Dangote reported incurring annual interest payments ranging from $50 million to $60 million on a $5.5 billion loan obtained from a consortium of local banks.
Despite these challenges, his objective remained focused on resolving Nigeria’s economic contradictions. Although Nigeria is the largest oil producer in Africa, the lack of operational domestic refineries forced the country to export its crude oil, refine it overseas, and then re-import it as fuel, creating a cycle of inefficiency.
When Dangote’s refinery commenced operations earlier this year, it had to import crude oil, which increased operational costs, as much of the local production was committed to long-term contracts.
This situation highlights the complexities of achieving profitability in a nation grappling with a declining currency, a legacy of fuel subsidies, and high refining expenses. Discussions with the government and the state-owned Nigerian National Petroleum Corporation regarding foreign exchange rates, crude supply, and gas pricing—essential elements for Dangote’s financial viability—have occasionally been contentious.
Throughout his career, Dangote has maintained strong ties with Nigeria’s leadership, who have backed his initiatives to enhance the economy. However, his relationship with the current President, Bola Tinubu, who assumed office last year, has been less favorable. In January, the anti-corruption agency conducted a raid on Dangote Group’s offices as part of an inquiry into the foreign exchange transactions of a former official. The Dangote Group described the incident as an “unwarranted embarrassment” and asserted that it had not been implicated in any wrongdoing.
A representative of the Nigerian government chose not to provide any comments.
The deteriorating relationship has paralleled Dangote's increasingly forthright demeanor. During a summer conference, he made a negative comparison between the "mafia in oil" and drug cartels. He has openly expressed his disdain for the state-owned NNPC, which plays a crucial role in providing him with local oil for refining. To maintain a favorable relationship, he negotiated a deal in 2021 to sell them a 20% stake in the refinery, valuing it at $13.8 billion. However, this arrangement has not gone as planned, with the stake later reduced to 7.2%. He justified the "good price" he offered as a necessity, stating that opposing them would lead to failure.
“It’s an industry known for its games,” he remarked. “It’s an industry rife with corruption.”
An NNPC spokesperson chose not to comment.
Typically reserved, Dangote's newfound assertiveness is enhancing his public image, according to Zainab Usman, a political economist and director of the Africa Program at the Carnegie Endowment for International Peace.
“He made this $20 billion investment to benefit the country, and there’s a perception that a group of corrupt politicians, viewing the refinery as a threat, are attempting to undermine him,” she noted. “His candidness on the issue has garnered him considerable respect.”
‘Real Legacy’
In recent times, preserving wealth in Nigeria has become significantly more challenging. The naira has depreciated by over two-thirds against the dollar following Tinubu’s easing of foreign exchange controls. Dangote claims that 80% of his business transactions are dollar-based. He stated that next year, Dangote Group will emerge as the largest supplier of dollars to Nigeria, which is grappling with economic difficulties exacerbated by a shortage of US currency.
“Our strategy is whatever we do, we generate as much foreign exchange as possible,” he said. “That will shield us from the issues of currency devaluation in Africa.”
Dangote has strong connections to his homeland, having resided in the same Lagos mansion for 34 years. However, like many ultra-wealthy individuals, his assets are not tied to a specific country; they are managed through a Cayman Islands-based entity known as Greenview. To further diversify and oversee his wealth, he is establishing a family office in Dubai, which will be led by his daughter Halima, who relocated there this summer.
He aims to co-invest in various ventures and explore partnerships with other billionaires, akin to a fund he has created with his friend David Rubenstein, co-founder of Carlyle Group Inc.
In addition to his philanthropic efforts through a foundation that contributes millions annually, he aspires to increase his charitable giving to $10 billion over time. He envisions gradually stepping back from the business, passing it on to his children and other family members, including a grandson who will graduate from university next year. He reflects on the fact that his daughters are now older than he was when he acquired his first private jet at 23 and built his mansion at 33.
The challenges associated with constructing the refinery have heightened his interest in diversification, although he takes pride in the fact that his legacy will be rooted in the industrial sector.
“I’m passionate about it because you’re going to leave a real legacy, especially in Africa,” he said. “I’m making my country and continent self-sufficient in things that they never ever dreamed of.”
He finds it difficult to avoid drawing parallels with Johann Rupert, the South African chairman of Cie Financiere Richemont SA, the parent company of Cartier, who was recently approaching Dangote's status as Africa's wealthiest individual.
“Sorry, it’s better than selling bags,” he laughed playfully. “Some people have done really well by that too but it’s not the same.”