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Africa’s Richest Man Bets Big On Oil Refinery
LAGOS, Nigeria—Africa’s richest man sat barefoot on his new yacht in a lagoon here after one other evening of about three hours sleep.
The day was stuffed with conferences 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 needed some face time.
“You don’t see any signal of stress on me,” Aliko Dangote stated with a tight smile. The fifty six-yr-outdated businessman stated he was getting an vitality increase from a weeklong fast that limits him to six glasses of watermelon juice a day.
For 2 a long time, 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 across sixteen international locations. Income in three publicly traded companies he controls hit $1 billion in the first 9 months of 2013, up 43% from a year earlier.
Mr. Dangote now has a plan to quintuple his wealth—and turn into one of the five richest people in the world. He will spend $9 billion to build the most important privately owned refinery in Nigeria, which produces more oil than another African nation but should import many of the motor fuel and diesel it uses as a result of present refineries are dilapidated and inefficient.
Within about two years, the new refinery in a stretch of swampy shoreline outdoors Lagos could begin piping in crude from roughly 7 miles offshore, bypassing a site visitors jam of tankers typically stuck for weeks. Competing against 4 government-managed refineries that run at barely 20% of their capability, Mr. Dangote would double the country’s maximum refinery output.
The refinery venture is a bet that Africa’s economic system will keep rising a lot faster than the remainder of the world, especially as a wave of consumerism sweeps the continent.
New airlines are taking off so shortly that some jet-gasoline sellers, harm by a shortage, have been caught making an attempt to fill airplane tanks with kerosene as an alternative. Car imports by Nigeria’s predominant port have risen to about 300 vehicles a day.
As a result, Africa now could be the world’s quickest-rising oil person, and the International Power Agency expects oil consumption in Africa to surge about 30% to four.5 million barrels a day by 2018. The soar represents 15% of the world’s projected rise in oil demand.
Mr. Dangote and his supporters, together with Nigeria’s president, see more than money in the brand new refinery. To them, it additionally defies centuries of Africa exporting its most treasured resources—including gold, diamonds and humans—rather than placing them to work at residence.
Nigeria’s authorities has collected about $1.Three trillion in oil revenue since 1980, according to the Economist Intelligence Unit. Yet about 60% of the country’s 170 million people stay on lower than $1 a day, in keeping with the government. It says as a lot as four hundred,000 barrels of oil per day—or one-sixth of total output—are pilfered from pipelines by bandits. A lot of the stolen crude is loaded onto barges at evening and shipped abroad.
The refinery planned by Mr. Dangote will “change the economic and industrial landscape of Nigeria,” stated Doyin Okupe, senior particular 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 normally reserved for government planning periods.
The challenge faces daunting challenges. Competition will likely be fierce from U.S. Asian and European firms that additionally need to fulfill Africa’s thirst for gasoline and other gasoline products. Some power corporations are expanding operations in Africa, and American refineries are gaining an edge world wide because the U.S. shale-oil boom lowers their production costs.
Nigeria also subsidizes imported oil, maintaining prices on the gas pump about one-third decrease than they are in the U.S.
“I don’t know the way he’ll do it, however I do know it is going to be very, very robust,” mentioned Bismarck Rewane, managing director of Monetary Derivatives Co. a research agency in Lagos. He has identified Mr. Dangote since they lived close to each other in the 1980s and attended center-of-the-night time home events collectively.
Despite all his connections, Mr. Dangote hasn’t gained authorities approval for a license wanted to build the refinery. That isn’t unusual. From 2000 to 2010, more than 100 heating oil prices seattle refinery development tasks have been announced in Africa. Only one was constructed, in response to consulting firm Citac Africa Ltd. Others usually fell sufferer to political interference or high borrowing costs.
“We’ll get it,” Mr. Dangote said concerning the license. The ministry reviewing the license application declined to remark. Nigeria’s subsequent presidential election is scheduled for 2015.
In an interview on his yacht, named Mariya after his mother, the billionaire mentioned his refinery will don’t have any bother competing because it should avoid Nigeria’s costly and congested ports. He hasn’t mentioned if it is going to sell gasoline to retailers for less than they pay now.
He additionally expects Nigeria to eventually abolish international-oil subsidies, which price the government $6.5 billion final yr.
Previously decade, heating oil prices seattle Africa’s economic system has grown by an average of 5.6% a yr, in contrast with the world-extensive growth charge of 3.6% per 12 months, in accordance with the Worldwide Monetary Fund. The surge has helped turn among the richest businessmen in Africa into tycoons.
Africa now has 27 billionaires, up from sixteen in 2012 and simply two a decade ago, according to Forbes magazine. These two were white South Africans.
Mr. Dangote was born into wealth. Close to the dawn of British colonialism in the early 1900s, his nice-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 rising appetite.
Throughout the oil increase of the 1970s, an uncle of Mr. Dangote gave him a government-issued license to import cement. But few Nigerians had ever heard of him. Mr. Dangote spent a lot of his time and earnings in Brazil, normally enjoying the Carnival festival earlier than Lent. In the 1990s, a friend talked him into flying to Atlanta, the place he purchased a home and then swung via every different month for jaunts at nightclubs.
He felt snug amid Atlanta’s traditionally black schools and restaurants, 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 sold the home and purchased a bigger one.
But he started to feel the tug of his homeland, the most populous nation in Africa. On trips to Brazil for Carnival, he saw signs of the financial progress the country had made: Desperate hustlers, touts and cash changers didn’t swarm him at the airport any extra. And cement factories had been popping up within the mountains.
That gave him an concept to do something large, he mentioned. He flew back to Nigeria, contributed to the upstart People’s Democratic Celebration and made a promise after its presidential candidate received election in 1999. Mr. Dangote vowed to build one of many world’s largest cement plants if the federal heating oil prices seattle government restricted the stream of cement by means of the country’s ports.
The businessman bought what he needed. The bounds on imports of cement—the most typical constructing material in Africa—lifted prices to twice the world-huge average. His enterprise 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 manufacturing facility and an adjoining, 1.7 mile-long airstrip, borrowing some of the cash at an interest rate of 42%. They opened in 2008, and he vaulted onto the billionaires’ checklist for the primary time.
Dangote Group now employs about 25,000 individuals in Nigeria, is building cement factories in 14 international locations in Africa and is shopping for mining licenses from Kenya to Zambia.
A pop song in Nigeria referred to as “Aliko Dangote Particular” includes the line “Cowl of Forbes, he no be joke.” The motivational ebook “Dangote’s Ten Commandments on Money” cites the billionaire’s advice “to make the best of your time because any time misplaced can’t be regained.” No. 8: “Imagine in Nigeria.”
“It’s something he mentioned to me years ago: ‘Only Africans will build Africa,’ ” mentioned Kola Karim, chief government of oil-exploration firm Shoreline Pure Sources Ltd. Mr. Karim sells many of the oil from Shoreline’s fields within the Niger River delta to India but would slightly do enterprise with Mr. Dangote.
The two males, who are associates, lately 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 mentioned. “The market is in Africa.”
Mr. Dangote will soon borrow $1.5 billion to lease about 740,000 acres, an space 50 instances larger than Manhattan. He wants to grow sugar and rice for Dangote Group’s processing plants.
The realm in northeastern Nigeria is swarming with fighters from Islamic insurgency Boko Haram, but the fields will put so many people to work that the insurgents will “go away 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 greater than a yr about his refinery plans. Then he began telling them how much they need to lend—and at what curiosity fee.
“When he wants one thing, he gets it,” stated Edmund Boyo, a accomplice at law firm Clifford Chance LLP who worked on the deal.
In September, Dangote Group announced a $three.Three billion syndicated loan from banks led by Customary Chartered of the U.Okay. and Nigeria’s Guaranty Trust Bank PLC. Terms of the $3.3 billion mortgage weren’t disclosed, although he mentioned it includes a penalty if he repays the banks too rapidly.
These days, banks typically charge him lower than 6% interest, he added, a lower interest fee than Nigeria’s government gets on its loans.
Yvonne Ike, chief executive of funding financial institution Renaissance Capital’s operations in western Africa, mentioned she has seen bankers’ “eyes watering after they thought about how much that they had lent” to Mr. Dangote at rock-backside interest rates in contrast with other firms. Still, the bankers “couldn’t stand to not be part of the largest debt deal in Africa,” she said.
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 promoting oil fields alongside Nigeria’s coast after lengthy battles with kidnappers and pipeline-bombing oil thieves.
The billionaire wants to purchase the 2 corporations’ tracts of oil-rich swamp. To guard the oil from bandits, he will bury pipelines to and from the refinery. Chevron and Shell declined to remark.
The billionaire hasn’t introduced any offers to sell the gasoline, plastic and different fuel merchandise that can be made by his refinery.
He likely must lure away customers from state-owned oil firm Nigerian National Petroleum Corp. It controls the 4 rundown refineries that dominate Nigeria’s oil business. Government leaders have denounced the company as opaque and unscrupulous.
“It’s a waste pipe of corruption,” said Ken Saro-Wiwa Jr. a spokesman for Mr. Jonathan, Nigeria’s president. An NNPC spokeswoman could not 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 yr. That was his first vacation in 17 years, and he has no plans for an additional one. The refinery is keeping him too busy.
“If there’s anything higher than the nationwide honor that the president gave me two years in the past, which I do respect very a 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 private jet was landing in Lagos at 1 a.m. final month when his pilot acquired a call from air-traffic controllers. Mr. Gates, the Microsoft Corp. co-founder and one of the world’s richest males, had simply spent two days with Mr. Dangote however was stranded four hundred miles away by a broken-down plane.
Mr. Dangote advised his pilot to turn round, pick up Mr. Gates and fly back to Lagos. Mr. Dangote got home at four a.m.