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Africa’s Richest Man Bets Huge On Oil Refinery
LAGOS, Nigeria—Africa’s richest man sat barefoot on his new yacht in a lagoon right here after one other evening of about three hours sleep.
The day was filled with meetings about his cement firm and preparations for a polio-combating journey with fellow billionaire Bill Gates. His BlackBerry buzzed every few minutes with messages from the president of Benin, and a former U.S. ambassador wished some face time.
“You do not see any signal of stress on me,” Aliko Dangote mentioned with a tight smile. The 56-yr-previous businessman mentioned he was getting an vitality boost from a weeklong fast that limits him to six glasses of watermelon juice a day.
For two decades, Mr. Dangote (pronounced DAHN-go-tay) has turned his relentlessness, connections and entrepreneurial bets on the rise of Africa into a fortune estimated at about $22 billion.
Most of it comes from his controlling stake in a conglomerate of cement, sugar, salt and noodle factories sprawled throughout 16 countries. Income in three publicly traded corporations he controls hit $1 billion in the primary nine months of 2013, up 43% from a year earlier.
Mr. Dangote now has a plan to quintuple his wealth—and change into one of the 5 richest people on the planet. He will spend $9 billion to construct the biggest privately owned refinery in Nigeria, which produces extra oil than any other African country but must import many of the motor gas and diesel it makes use of as a result of current refineries are dilapidated and inefficient.
Inside about two years, the new refinery in a stretch of swampy shoreline outdoors Lagos could start piping in crude from roughly 7 miles offshore, bypassing a site visitors jam of tankers usually caught for weeks. Competing in opposition to 4 government-managed refineries that run at barely 20% of their capacity, Mr. Dangote would double the country’s most refinery output.
The refinery undertaking is a wager that Africa’s economic system will keep growing much quicker than the rest of the world, particularly as a wave of consumerism sweeps the continent.
New airways are taking off so shortly that some jet-fuel sellers, harm by a shortage, have been caught trying to fill airplane tanks with kerosene as an alternative. Car imports via Nigeria’s main port have risen to about 300 cars a day.
Because of this, Africa now’s the world’s quickest-rising oil user, and the Worldwide Vitality Agency expects oil consumption in Africa to surge about 30% to four.5 million barrels a day by 2018. The jump represents 15% of the world’s projected rise in oil demand.
Mr. Dangote and his supporters, including Nigeria’s president, see more than cash in the new refinery. To them, it additionally defies centuries of Africa exporting its most treasured resources—including gold, diamonds and humans—rather than putting them to work at dwelling.
Nigeria’s government has collected about $1.3 trillion in oil revenue since 1980, in line with the Economist Intelligence Unit. Yet about 60% of the nation’s 170 million individuals dwell on less than $1 a day, according to the federal government. It says as a lot as 400,000 barrels of oil per day—or one-sixth of whole output—are pilfered from pipelines by bandits. Most of the stolen crude is loaded onto barges at night and shipped abroad.
The refinery deliberate by Mr. Dangote will “change the financial and industrial landscape of Nigeria,” said Doyin Okupe, senior special assistant to Nigeria President Goodluck Jonathan. The president thanked the billionaire and his bankers by inviting them to Mr. Jonathan’s villa on a day often reserved for authorities planning periods.
The project faces daunting challenges. Competitors will be fierce from U.S. Asian and European companies that additionally need to satisfy Africa’s thirst for gasoline and different gas merchandise. Some vitality corporations are expanding operations in Africa, and American refineries are gaining an edge around the world because the U.S. shale-oil growth lowers their manufacturing costs.
Nigeria also subsidizes imported oil, holding prices on the gas pump about one-third decrease than they’re in the U.S.
“I don’t understand how he’ll do it, but I do know it’s going to be very, very robust,” said Bismarck Rewane, managing director of Financial Derivatives Co. a research firm in Lagos. He has identified Mr. Dangote since they lived close to one another in the 1980s and attended middle-of-the-evening home parties together.
Regardless of all his connections, Mr. Dangote hasn’t gained government approval for a license wanted to construct the refinery. That is not unusual. From 2000 to 2010, more than one hundred refinery development projects had been announced in Africa. Only one was constructed, according to consulting agency Citac Africa Ltd. Others typically fell victim to political interference or high borrowing prices.
“We are going to get it,” Mr. Dangote stated in regards to the license. The ministry reviewing the license utility declined to remark. Nigeria’s subsequent presidential election is scheduled for 2015.
In an interview on his yacht, named Mariya after his mom, the billionaire said his refinery will haven’t any hassle competing as a result of it’s going to avoid Nigeria’s pricey and congested ports. He hasn’t mentioned if it’ll sell gasoline to retailers for less than they pay now.
He additionally expects Nigeria to ultimately abolish foreign-oil subsidies, which price the government $6.5 billion final yr.
In the past decade, Africa’s economic system has grown by a mean of 5.6% a 12 months, in contrast with the world-wide development price of three.6% per year, based on the Worldwide Financial Fund. The surge has helped turn some of the richest businessmen in Africa into tycoons.
Africa now has 27 billionaires, up from sixteen in 2012 and just two a decade in the past, in keeping with Forbes journal. These two were white South Africans.
Mr. Dangote was born into wealth. Close to the dawn of British colonialism within the early 1900s, his great-grandfather, Alhassan Dantata, cornered the peanut market in drought-prone northern Nigeria. While different Nigerians chafed at colonial rule, Mr. Dantata exported tons of peanuts to feed Europe’s growing appetite.
Through the oil boom of the 1970s, an uncle of Mr. Dangote gave him a government-issued license to import cement. However few Nigerians had ever heard of him. Mr. Dangote spent much of his time and earnings in Brazil, often having fun with the Carnival festival earlier than Lent. Within the nineteen nineties, a friend talked him into flying to Atlanta, the place he bought a house and then swung by means of each different month for jaunts at nightclubs.
He felt snug amid Atlanta’s traditionally black faculties and eating places, far away from a succession of army coups and botched elections in Nigeria. Startled by a snake in his basement in the future, Mr. Dangote offered the home and purchased a larger one.
However he began to feel the tug of his homeland, the most populous country in Africa. On trips to Brazil for Carnival, he noticed signs of the financial progress the nation had made: Desperate hustlers, touts and cash changers didn’t swarm him on the airport any more. And cement factories had been popping up within the mountains.
That gave him an idea to do something large, he mentioned. He flew back to Nigeria, contributed to the upstart People’s Democratic Social gathering and made a promise after its presidential candidate received election in 1999. Mr. Dangote vowed to construct one of the world’s largest cement plants if the federal government restricted the movement of cement by way of the country’s ports.
The businessman received what he wanted. The limits on imports of cement—the most common constructing material in Africa—lifted costs to twice the world-wide average. His business empire mushroomed. Dangote Group now makes a two-thirds markup on each bag of cement it sells.
In return, Mr. Dangote spent $1 billion on the cement factory and an adjoining, 1.7 mile-lengthy airstrip, borrowing a few of the money at an interest fee of forty two%. They opened in 2008, and he vaulted onto the billionaires’ record for the first time.
Dangote Group now employs about 25,000 individuals in Nigeria, is building cement factories in 14 countries in Africa and is buying mining licenses from Kenya to Zambia.
A pop music in Nigeria referred to as “Aliko Dangote Special” contains the road “Cowl of Forbes, he no be joke.” The motivational e book “Dangote’s Ten Commandments on Money” cites the billionaire’s recommendation “to make the best of your time because any time lost can’t be regained.” No. 8: “Believe in Nigeria.”
“It is something he said to me years in the past: ‘Solely Africans will construct Africa,’ ” stated Kola Karim, chief government of oil-exploration company Shoreline Pure Sources Ltd. Mr. Karim sells many of the oil from Shoreline’s fields in the Niger River delta to India but would somewhat do business with Mr. Dangote.
The two males, who’re buddies, not too long ago talked over the small print on a dock subsequent to the billionaire’s yacht but have not introduced an agreement. “This is the place my future lies,” Mr. Karim said. “The market is in Africa.”
Mr. Dangote will quickly borrow $1.5 billion to lease about 740,000 acres, an space 50 instances larger than Manhattan. He needs to grow sugar and rice for Dangote Group’s processing plants.
The area in northeastern Nigeria is swarming with fighters from Islamic insurgency Boko Haram, but the fields will put so many individuals to work that the insurgents will “depart us alone,” Mr. Dangote predicted. As soon as the farm is thriving, “Boko Haram won’t have guys to recruit.”
The industrialist nudged Nigerian bankers for more than a yr about his refinery plans. Then he started telling them how a lot they need to lend—and at what curiosity rate.
“When he crude oil etf vanguard wants one thing, he will get it,” stated Edmund Boyo, a accomplice at legislation agency Clifford Probability LLP who labored on the deal.
In September, Dangote Group introduced a $three.Three billion syndicated mortgage from banks led by Customary Chartered of the U.Okay. and Nigeria’s Guaranty Trust Financial institution PLC. Phrases of the $3.3 billion loan weren’t disclosed, although he said it features a penalty if he repays the banks too shortly.
These days, banks sometimes cost him less than 6% curiosity, he added, a decrease curiosity price than Nigeria’s authorities will get on its loans.
Yvonne Ike, chief government of investment bank Renaissance Capital’s operations in western Africa, stated she has seen bankers’ “eyes watering after they thought about how a lot that they had lent” to Mr. Dangote at rock-backside curiosity charges compared with other companies. Nonetheless, the bankers “couldn’t stand to not be a part of the largest debt deal in Africa,” she stated.
Mr. Dangote now could be making an attempt to line up oil to feed his refinery. Chevron Corp. CVX -1.Eighty five% and Royal Dutch Shell RDSB.LN +1.92% PLC are selling oil fields along Nigeria’s coast after lengthy battles with kidnappers and pipeline-bombing oil thieves.
The billionaire needs to buy the two firms’ tracts of oil-rich swamp. To protect the oil from bandits, he will bury pipelines to and from the refinery. Chevron and Shell declined to comment.
The billionaire hasn’t announced any offers to promote the gasoline, plastic and different fuel merchandise that will be made by his refinery.
He seemingly will have to lure away prospects from state-owned oil company Nigerian National Petroleum Corp. It controls the four rundown refineries that dominate Nigeria’s oil business. Government leaders have denounced the company as opaque and unscrupulous.
“It is a waste pipe of corruption,” said Ken Saro-Wiwa Jr. a spokesman for Mr. Jonathan, Nigeria’s president. An NNPC spokeswoman couldn’t be reached for comment.
Mr. Dangote hasn’t had a vacation since he took 18 youngsters, grandchildren, nephews and nieces to Walt Disney World in Florida final year. That was his first trip in 17 years, and he has no plans for another one. The refinery is holding him too busy.
“If there may be anything larger than the national honor that the president gave me two years in the past, which I do recognize very a crude oil etf vanguard lot, then he obviously wants to offer me another nationwide honor for building a refinery that we by no means, ever dreamt about,” he said.
The billionaire’s non-public jet was landing in Lagos at 1 a.m. final month when his pilot bought a call from air-site visitors controllers. Mr. Gates, the Microsoft Corp. co-founder and one of the world’s richest men, had just spent two days with Mr. Dangote however was stranded four hundred miles away by a broken-down airplane.
Mr. Dangote told his pilot to show around, pick up Mr. Gates and fly again to Lagos. Mr. Dangote got home at four a.m.