The Dangote Refinery is a 650,000 barrels per day (bpd) oil refinery located in Lekki, Lagos, Nigeria. It is the largest single-train refinery in the world and is expected to meet all of Nigeria’s domestic petroleum needs. The refinery was financed through a combination of equity investment and debt finance.
The Dangote Group, which is owned by Nigerian businessman Aliko Dangote, provided 50% of the financing for the refinery through equity investment. This means that Dangote contributed $9.25 billion of his own money to the project.
The remaining 50% of the financing for the refinery was provided through debt finance from a consortium of banks, including Access Bank, First Bank, Zenith Bank, and the African Export-Import Bank (Afreximbank). The Central Bank of Nigeria (CBN) also provided a N120 billion loan facility to the project.
Source of debt finance
The debt finance for the Dangote Refinery came from a variety of sources, including:
Nigerian banks: Nigerian banks played a major role in financing the refinery, providing around $5 billion in loans.
Foreign banks: Foreign banks also provided some of the debt finance for the refinery, including Standard Chartered Bank, HSBC, and BNP Paribas.
Export credit agencies: Export credit agencies (ECAs) are government agencies that provide financial support to exporters. ECAs from China, India, and South Korea provided around $3 billion in financing for the Dangote Refinery.
Multilateral development banks: Multilateral development banks (MDBs) are international financial institutions that provide loans and grants to developing countries. MDBs such as the World Bank and the African Development Bank provided around $1 billion in financing for the Dangote Refinery.
The Dangote Refinery is a major infrastructure project that is expected to have a significant impact on the Nigerian economy. The refinery was financed through a combination of equity investment and debt finance from a variety of sources. The Dangote Group will need to carefully manage its debt obligations to ensure the long-term success of the refinery.
Why was the Dangote Refinery financed through debt finance?
The Dangote Refinery is a very large and complex project, and it was not possible to finance it entirely through equity investment. Debt finance allowed the Dangote Group to spread the cost of the project over a longer period of time and to reduce its own financial risk.
What are the benefits of debt finance for the Dangote Group?
Debt finance has a number of benefits for the Dangote Group, including:
It allows the Dangote Group to conserve its cash resources.
It allows the Dangote Group to finance projects that are larger than its own equity base.
It can help the Dangote Group to improve its credit rating.
What are the risks of debt finance for the Dangote Group?
Debt finance also has a number of risks for the Dangote Group, including:
The Dangote Group must meet its debt obligations, even if the refinery is not profitable.
If the Dangote Group defaults on its debt, it could face bankruptcy.
Rising interest rates could increase the cost of debt finance for the Dangote Group.