The Lessons from Dangote Refinery on Big Projects in Nigeria

The Lessons from Dangote Refinery on Big Projects in Nigeria

Dangote Refinery: if you want to understand big project management in Nigeria, pay attention to it. Yes, in Sept 2013, billionaire Aliko Dangote told the world that he would build a refinery and production would begin in 2016. But since that date, the completion data has been moved at least 8 times. The question is this: why? Because if this was a government project, many of us could complain. This is a private enterprise and it is largely none of our business. But that does not mean we cannot learn from it.

Lesson 1: the banks which invested in this project would be under stress now if not that Dangote is loaded on cement and can move funds around to handle interests on loans.

Lesson 2: big projects in Nigeria are challenging, you need to plan very well.

Lesson 3: when things become hard, ask the government to invest to cushion debt servicing; NNPC is buying 20% of the refinery for $3.8 billion and that is a saving manna. To do that last one, you must command the conglomerate tax and get a bill updated.

Finally, Dangote Refinery had made a claim that only those with refinery license should be allowed to import petrol into Nigeria. If the government buys into that, over time, the refinery can even stop production, and focus on imports. That is why exemptions are bad: everyone needs to have the same rules.

Punch had reported that Dangote Group has desired  for inclusion in the Petroleum Industry Bill a requirement that the license to import petroleum products should be given only to companies with active refining licenses. The company does think that by having that requirement, companies will invest in local refining business.

When you do big projects in Nigeria, build a highly pessimistic model because from building rail tracks to power systems to oil refineries to steel complexes, big projects in Nigeria struggle! We need to reverse that, and if possible, use equity and not debt!


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