Lessons for Africa in Dangote refinery

In June this year, we attended the African CEO Forum in Kigali. The event, which brought together business leaders, policymakers and innovators from across the continent, not only discussed the future of African businesses, but also explored issues around exceptional, results-oriented leadership on the continent.

This is a critical area for many organizations in the region because their sustainability and scalability is tied to leadership.

As one of the world’s largest oil producers, Nigeria faces a paradoxical challenge. Crude oil, discovered in Nigeria in 1956, now forms the backbone of the country’s economy, with oil exports accounting for about 90% of the country’s total exports.

Nigeria is currently the second largest oil producer in Africa and a member of OPEC. However, the country still relies heavily on imported refined petroleum products to meet domestic demand, with more than 80% of demand met by imports.

In 2020, Nigeria imported $7.75 billion worth of refined petroleum products, making it the 17th largest importer of refined petroleum in the world and one of the highest in Africa.

The unfortunate reality of massive imports of refined products has major drawbacks including depletion of foreign exchange and inflationary pressures.

The refinery was the silver bullet that would solve the negative economic impacts of the dire situation and hence the vision of Dangote Oil Refinery.

During the forum, Mr. Aliko Dangote spoke about his journey in developing the world’s largest oil refining project in Nigeria.

This achievement not only highlights exceptional leadership, but also underscores Africa’s enormous potential to address its challenges and drive economic growth.

Mr. Dangote spoke about the many hurdles the project faced during its development. These included securing financing, navigating complex regulatory environments, sourcing and transporting materials, and overcoming massive logistical hurdles.

The construction of the Dangote Oil Refinery was not an easy journey at all, as it took seven years and cost $20 billion, according to an article published by the Financial Times.

To put this in perspective, the project cost nearly 20% of Kenya’s GDP and was fraught with a myriad of challenges.

To get the project off the ground, Dangote had to secure the necessary funding of the required scale. Despite the attractive vision of solving a huge problem, he had to convince financiers that the returns were worth the high risks.

The regulatory risk landscape presented another set of challenges, necessitating ongoing collaboration with government agencies to facilitate project progress.

He spoke about the many logistical challenges and complexities that almost derailed the project as the size of the refinery required the import of huge equipment and materials and yet there was not a single existing port that could accommodate the required equipment.

According to him, the team had to create a fit-for-purpose port with the extensive infrastructure required to transport them to the construction site for final assembly and commissioning.

But despite these challenges, the Dangote Oil Refinery has been built and is now poised to deliver significant benefits to Nigeria and the wider African continent.

Once fully operational, the refinery is expected to save Nigeria up to $23 billion in foreign exchange annually by reducing the need to import refined petroleum products.

This is equivalent to about 46% of Nigeria’s average annual imports over the past decade. The refinery’s capacity can now process up to 650,000 barrels per day (more than enough to meet domestic demand).

The project has the potential to provide massive foreign exchange needs, and will also help stabilize the Nigerian currency, reduce inflation, and improve the overall economic health of the country.

Moreover, the refinery is expected to create around 250,000 jobs when fully operational, both directly and indirectly, boosting local employment and stimulating economic activity.

The increased availability of refined products would also support many industries, driving further industrialization and economic diversification.

The project also highlights the important role that private enterprises can play in driving economic transformation and improving the lives of millions.

This is not just an industrial achievement, it is an inspiring beacon of hope for the entire continent. Africa is truly a land of great opportunity, and the success of Dangote Oil Refinery reinforces the idea that exceptional leadership is indeed possible on the continent.

The success of Dangote Oil Refinery is a testament to Mr. Dangote’s exceptional leadership and unwavering determination.

His vision to build the world’s largest oil refinery stemmed from a deep desire to contribute to his country’s development and address one of its most pressing economic challenges.

His story embodies the power of visionary leadership and the potential of African entrepreneurs to tackle large-scale challenges. It also underscores the importance of dreaming big and pursuing those dreams with relentless determination.

The refinery represents a significant step towards energy self-sufficiency in Africa. By increasing domestic refining capacity, African countries can reduce their dependence on foreign refineries, enhance their energy security, and retain greater value within their economies.

This transformation will enable African countries to harness their natural resources more effectively and leverage them for sustainable development. Africa salutes you, Mr. Dangote, for being a shining example of resilient entrepreneurship in solving Africa’s greatest problems. May many more follow your example.

Dr. Cesar Mwangi is the Executive Dean of the School of Business at Strathmore University.

Cartel B. Matabaro, Entrepreneur; Research Assistant and Advisor, Strathmore University School of Business.

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