Aliko Dangote Set to Spend $9 Billion on Refinery Project as Wave of Consumerism Sweeps the Continent
By Drew Hinshaw
Dec. 27, 2013 11:18 p.m. ET
LAGOS, Nigeria—Africa's richest man sat barefoot on his new yacht in a lagoon here after another night of about three hours sleep.
The day was filled with meetings about his cement company and preparations for a polio-fighting trip with fellow billionaire Bill Gates.
His BlackBerry buzzed every few minutes with messages from the
president of Benin, and a former U.S. ambassador wanted some face time.
"You don't see any sign of stress on me," Aliko Dangote said with a tight smile. The 56-year-old businessman said he was getting an energy boost from a weeklong fast that limits him to six glasses of watermelon juice a day.
"You don't see any sign of stress on me," Aliko Dangote said with a tight smile. The 56-year-old businessman said he was getting an energy 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 across 16 countries. Profits in three publicly
traded companies he controls hit $1 billion in the first nine months of
2013, up 43% from a year earlier.
Aliko Dangote has turned his gambles on the rise of Africa into a fortune estimated at about $22 billion.
Reuters
Mr. Dangote now has a plan to
quintuple his wealth—and become one of the five richest people in the
world. He will spend $9 billion to build the largest privately owned
refinery in Nigeria, which produces more oil than any other African
country but must import most of the motor fuel and diesel it uses
because existing refineries are dilapidated and inefficient.
Changing Energy World
The Journal has charted recent, dramatic changes buffeting global energy supply and demand, including surging U.S. output and rising thirst from China and Africa.- The U.S. is overtaking Russia as the world's largest oil and gas producer.
- Growing North American oil supplies promise to bolster U.S. energy security, and are already producing more stable prices. Among the beneficiaries, in turn, are policy makers in Washington.
- The U.S. energy boom is being heralded in Washington and beyond as bolstering U.S. energy security and creating jobs. But outside the country, it's roiling some of the world's biggest foreign suppliers of American crude.
- Big foreign producers are being laid low in unexpected ways by rising American energy production. Exhibit A is Gazprom, the company at the heart of Russian Prime Minister Putin's energy politics.
- China is overtaking the U.S. as a buyer of Middle East oil, adding fuel to diplomatic tension between the nations over security in the region.
- Another surprising consequence of the U.S. energy boom: falling carbon dioxide emissions.
- Amid the U.S. energy boom, OPEC, the oil cartel, is being split among those that are getting slammed because of the glut of U.S. crude and those that are surviving.
- Shell's experience in China, where it is charging ahead faster than competitors, shows how replicating the U.S. energy boom won't be easy.
- Energy giants are proposing half a trillion dollars in projects to export vast new finds of North American natural gas.
Within about two years, the new
refinery in a stretch of swampy shoreline outside Lagos could start
piping in crude from roughly 7 miles offshore, bypassing a traffic jam
of tankers often stuck for weeks. Competing against four
government-managed refineries that run at barely 20% of their capacity,
Mr. Dangote would double the country's maximum refinery output.
The
refinery project is a bet that Africa's economy will keep growing much
faster than the rest of the world, especially as a wave of consumerism
sweeps the continent.
New airlines are
taking off so quickly that some jet-fuel sellers, hurt by a shortage,
have been caught trying to fill airplane tanks with kerosene instead.
Car imports through Nigeria's main port have risen to about 300 cars a
day.
As a result, Africa now is the
world's fastest-growing oil user, and the International Energy Agency
expects oil consumption in Africa to surge about 30% to 4.5 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 money in the
new refinery. To them, it also defies centuries of Africa exporting its
most precious resources—including gold, diamonds and humans—rather than
putting them to work at home.
Nigeria's
government has collected about $1.3 trillion in oil revenue since 1980,
according to the Economist Intelligence Unit. Yet about 60% of the
country's 170 million people live on less than $1 a day, according to
the government. It says as much as 400,000 barrels of oil per day—or
one-sixth of total output—are pilfered from pipelines by bandits. Most
of the stolen crude is loaded onto barges at night and shipped abroad.
The
refinery planned by Mr. Dangote will "change the economic 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 usually reserved for government planning sessions.
The
project faces daunting challenges. Competition will be fierce from
U.S., Asian and European companies that also want to satisfy Africa's
thirst for gasoline and other fuel products. Some energy firms are
expanding operations in Africa, and American refineries are gaining an
edge around the world as the U.S. shale-oil boom lowers their production
costs.
Nigeria also subsidizes imported oil, keeping prices at the gas pump about one-third lower than they are in the U.S.
"I
don't know how he's going to do it, but I do know it's going to be
very, very tough," said Bismarck Rewane, managing director of Financial
Derivatives Co., a research firm in Lagos. He has known Mr. Dangote
since they lived near each other in the 1980s and attended
middle-of-the-night house parties together.
Despite
all his connections, Mr. Dangote hasn't won government approval for a
license needed to build the refinery. That is not unusual. From 2000 to
2010, more than 100 refinery construction projects were announced in
Africa. Only one was built, according to consulting firm Citac Africa
Ltd. Others often fell victim to political interference or high
borrowing costs.
"We will get it," Mr. Dangote said
about the license. The ministry reviewing the license application
declined to comment. Nigeria's next presidential election is scheduled
for 2015.
In an interview on his yacht,
named Mariya after his mother, the billionaire said his refinery will
have no trouble competing because it will avoid Nigeria's costly and
congested ports. He hasn't said if it will sell gasoline to retailers
for less than they pay now.
He also expects Nigeria to eventually abolish foreign-oil subsidies, which cost the government $6.5 billion last year.
In
the past decade, Africa's economy has grown by an average of 5.6% a
year, compared with the world-wide growth rate of 3.6% per year,
according to the International Monetary Fund. The surge has helped turn
some of the richest businessmen in Africa into tycoons.
Africa
now has 27 billionaires, up from 16 in 2012 and just two a decade ago,
according to Forbes magazine. Those two were white South Africans.
Mr.
Dangote was born into wealth. Near the dawn of British colonialism in
the early 1900s, his great-grandfather, Alhassan Dantata, cornered the
peanut market in drought-prone northern Nigeria. While other Nigerians
chafed at colonial rule, Mr. Dantata exported tons of peanuts to feed
Europe's growing appetite.
During the
oil boom 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 much of his time and earnings in Brazil,
usually enjoying the Carnival festival before Lent. In the 1990s, a
friend talked him into flying to Atlanta, where he bought a house and
then swung through every other month for jaunts at nightclubs.
He
felt comfortable amid Atlanta's historically black colleges and
restaurants, far away from a succession of military coups and botched
elections in Nigeria. Startled by a snake in his basement one day, Mr.
Dangote sold the house and bought a larger one.
But
he started to feel the tug of his homeland, the most populous country
in Africa. On trips to Brazil for Carnival, he saw signs of the economic
progress the country had made: Desperate hustlers, touts and money
changers didn't swarm him at the airport any more. And cement factories
were popping up in the mountains.
“ 'If there is anything higher than the national honor that the president gave me two years ago…then he obviously needs to give me another national honor for building a refinery that we never, ever dreamt about.' ”
That gave him an idea to do something
big, he said. He flew back to Nigeria, contributed to the upstart
People's Democratic Party and made a promise after its presidential
candidate won election in 1999. Mr. Dangote vowed to build one of the
world's largest cement plants if the government restricted the flow of
cement through the country's ports.
The
businessman got what he wanted. The limits on imports of cement—the most
common building material in Africa—lifted prices to twice the
world-wide average. His business empire mushroomed. Dangote Group now
makes a two-thirds markup on every bag of cement it sells.
In
return, Mr. Dangote spent $1 billion on the cement factory and an
adjoining, 1.7 mile-long airstrip, borrowing some of the money at an
interest rate of 42%. They opened in 2008, and he vaulted onto the
billionaires' list for the first time.
Dangote
Group now employs about 25,000 people in Nigeria, is building cement
factories in 14 countries in Africa and is buying mining licenses from
Kenya to Zambia.
A pop song in Nigeria
called "Aliko Dangote Special" includes the line "Cover of Forbes, he no
be joke." The motivational book "Dangote's Ten Commandments on Money"
cites the billionaire's advice "to make the best of your time because
any time lost cannot be regained." No. 8: "Believe in Nigeria."
"It's
something he said to me years ago: 'Only Africans will build Africa,' "
said Kola Karim, chief executive of oil-exploration company Shoreline
Natural Resources Ltd. Mr. Karim sells most of the oil from Shoreline's
fields in the Niger River delta to India but would rather do business
with Mr. Dangote.
The two men, who are friends,
recently talked over the details on a dock next to the billionaire's
yacht but haven't announced an agreement. "This is where my future
lies," Mr. Karim said. "The market is in Africa."
Mr.
Dangote will soon borrow $1.5 billion to lease about 740,000 acres, an
area 50 times bigger than Manhattan. He wants 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 people to work
that the insurgents will "leave us alone," Mr. Dangote predicted. Once
the farm is thriving, "Boko Haram will not have guys to recruit."
The
industrialist nudged Nigerian bankers for more than a year about his
refinery plans. Then he started telling them how much they should
lend—and at what interest rate.
"When he wants something, he gets it," said Edmund Boyo, a partner at law firm Clifford Chance LLP who worked on the deal.
In
September, Dangote Group announced a $3.3 billion syndicated loan from
banks led by Standard Chartered of the U.K. and Nigeria's Guaranty Trust
Bank PLC. Terms of the $3.3 billion loan weren't disclosed, though he
said it includes a penalty if he repays the banks too quickly.
Nowadays,
banks sometimes charge him less than 6% interest, he added, a lower
interest rate than Nigeria's government gets on its loans.
Yvonne
Ike, chief executive of investment bank Renaissance Capital's
operations in western Africa, said she has seen bankers' "eyes watering
when they thought about how much they had lent" to Mr. Dangote at
rock-bottom interest rates compared with other companies. Still, the
bankers "couldn't stand not to be a part of the biggest debt deal in
Africa," she said.
Mr. Dangote now is trying to line up oil to feed his refinery.
Chevron Corp.
CVX +0.34%
and
Royal Dutch Shell
RDSB.LN +0.40%
PLC are selling oil fields along Nigeria's coast after long battles with kidnappers and pipeline-bombing oil thieves.
The
billionaire wants to buy the two companies' 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 deals to sell the gasoline, plastic
and other fuel products that will be made by his refinery.
He
likely will have to lure away customers from state-owned oil company
Nigerian National Petroleum Corp. It controls the four rundown
refineries that dominate Nigeria's oil industry. 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 couldn't be
reached for comment.
Mr. Dangote hasn't
had a vacation since he took 18 children, grandchildren, nephews and
nieces to Walt Disney World in Florida last year. That was his first
vacation in 17 years, and he has no plans for another one. The refinery
is keeping him too busy.
"If there is
anything higher than the national honor that the president gave me two
years ago, which I do appreciate very much, then he obviously needs to
give me another national honor for building a refinery that we never,
ever dreamt about," he said.
The
billionaire's private jet was landing in Lagos at 1 a.m. last month when
his pilot got a call from air-traffic controllers. Mr. Gates, the Microsoft
Corp. co-founder and one of the world's richest men, had just spent two
days with Mr. Dangote but was stranded 400 miles away by a broken-down
plane.
Mr. Dangote told his pilot to
turn around, pick up Mr. Gates and fly back to Lagos. Mr. Dangote got
home at 4 a.m. and was at his desk by 7:30.
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