Oil Refinery Project Drags Aliko Dangote Into N300 billion Debt

Aliko Dangote has approached the debt market in Nigeria to borrow N300 billion, as he seeks funds to finance his oil refinery project that has fallen behind schedule.

Dangote, through his company, Dangote Industries Limited (DIL), listed N300 billion series 1 and 2 bonds on the capital market in the country, Nigerian Exchange Limited (NGX) and the FMDQ. 

The oil refinery, which is three years behind schedule, has been gulping significant amounts, with the projection that it will cost at least $1.1 billion to be completed. 

As the company race to complete the construction before the end of 2023, there have been reports that Dangote has been depending on the debt market. 

In May 2022, an American credit rating agency, Fitch Ratings, had disclosed that Dangote plans to borrow $750 million from the Nigerian bond market. 

Also, in July last year, the company report emerged that the firm plans to obtain N187.6 billion from the N300 billion bonds programme to partly finance the refinery and other subsidiary companies. 

The company has now completed the listing of the N300 billion bonds programme, which means Dangote came back to the bond market to collect the remaining debt. 

Investors that have parted with cash to fund Dangote’s debt include domestic pension funds, asset managers and insurance companies. 

It is the largest aggregate local currency bond issuance by a corporate in the Nigerian capital markets within a calendar year. 

“The proceeds from the Series 1 and 2 bond issuances were dedicated to part-financing the Dangote Petroleum Refinery Project which is the initiative by the Group to establish an Integrated Petrochemical Complex, and the largest Single Train Petroleum Refinery in the world,” the company had said on Wednesday. 

Prime Business Africa understands that the refinery was slated for completion in 2019, but due to financial constraints, as well as the COVID-19 pandemic the next year, the completion timeframe was extended. 

Fitch had stated that the more Dangote postpone the completion of the refinery and keep depending on the debt market for funding, investors in the capital market would be willing to disburse more cash, in the form of debt, to the billionaire’s company. 

“If the transaction is not successful, or should completion costs overrun or market conditions in the cement or urea sector deteriorate materially, we do not believe that DIL’s existing creditors would have further lending capacity. 

“We believe that further asset sales, either in cement, or stakes in the projects, would be the more likely options to address funding of the refinery,” Fitch said in the report.

Aliko Dangote is worth $13.5 billion, with stakes in cement and sugar, amongst others contributing to his wealth. The billionaire’s wealth would be largely impacted by the completion of the refinery which is expected to grow the N1.78 trillion revenue generated from cement and sugar businesses in 2022.