Dangote’s Standoff With Nigeria Intensifies, Risking Investments

• Aliko Dangote’s refinery, producing diesel with significantly lower sulfur content than imports, faces scrutiny from Nigerian lawmakers who are considering a nationwide investigation into fuel quality.
• Dangote’s ongoing conflicts with authorities, including a potential diesel import ban and accusations of seeking monopoly status, have led him to halt plans for a new steel plant in Nigeria.
• Despite these challenges, Dangote’s $20 billion refinery plans to increase production, emphasizing the significant economic impact and the need for clarity on allegations of preferential treatment and financial support.

Dangote’s Standoff With Nigeria Intensifies, Risking Investments

Aliko Dangote, Africa’s wealthiest individual, is currently embroiled in a tense standoff with Nigerian authorities, potentially jeopardizing significant investments. Despite his assertion that his refinery produces the highest quality diesel in Nigeria, lawmakers are considering an investigation into the overall fuel quality in the country.

Diesel Quality Dispute

Dangote’s 650,000 barrel-a-day refinery, which began operations in January 2024, has been under scrutiny regarding the quality of its diesel. Tests from the refinery lab reported that their diesel contains 87 parts per million (ppm) of sulfur, significantly lower than two imported varieties that tested over 1,800 ppm. Dangote aims to further reduce this to 10 ppm by the end of the month, asserting that his refinery produces the “best diesel in Nigeria.”

Legislative Involvement

This issue gained legislative attention when Dangote conducted a personal tour of his lab for Nigerian politicians, including Tajudeen Abbas, the Speaker of the House of Representatives. Abbas announced that lawmakers would investigate the quality of diesel across the nation, potentially setting the stage for a broader regulatory confrontation.

Ongoing Conflicts

The multi-billionaire has faced multiple challenges with authorities this year. The anti-graft agency raided his offices in January, and recent allegations suggest he seeks an import ban on diesel, which would potentially grant his refinery a monopoly. These accusations have led Dangote to halt plans for a new 5 million ton-per-year steel plant in Nigeria, fearing that the project would provide further ammunition to his critics.

Monopoly Allegations

Addressing the media in Lagos, Dangote refuted claims of seeking monopoly status, labeling such accusations as “very, very unfair.” He highlighted that his decision to abandon the steel plant project was influenced by the current hostile environment and the potential backlash it could generate.

Regulatory Challenges

A government regulator accused Dangote of requesting a suspension on diesel and aviation fuel imports, which would concentrate market control in his hands. However, Dangote denied this, emphasizing the pride and achievement his refinery represents for Nigeria and Africa, as many other nations remain dependent on fuel imports.

Refinery Operations and Future Plans

The $20 billion refinery currently produces aviation fuel, naphtha, and diesel. Dangote revealed that he paid $100 million for the land in Lagos’ free trade zone where the refinery is situated. By August, the refinery plans to commence gasoline production, increasing output to 550,000 barrels per day by year-end from the current 350,000 barrels.

Financial Support and Economic Impact

Dangote dismissed allegations of government financial support or preferential foreign exchange access for building the refinery. He detailed receiving $2.5 billion in foreign exchange from the central bank over the 10.5 years it took to complete the refinery, with an additional $200 million in forwards pending collection. He argued that claims suggesting his projects depleted national reserves were incorrect.

Foreign Exchange and Economic Context

Before June 2023, Nigeria operated a de facto dollar peg, which artificially strengthened the naira against the dollar, with the central bank rationing dollars at the official rate. Since the relaxation of these controls, the naira has depreciated by approximately 70% against the dollar.

Wealth and Influence

With assets valued at $14.5 billion according to Bloomberg’s Billionaires Index, Dangote remains Africa’s richest person. His significant investments and influence continue to shape Nigeria’s economic landscape, though current conflicts with authorities threaten to impact future projects and broader economic stability.

As Dangote navigates these challenges, the outcome of the legislative investigation and ongoing regulatory disputes will be crucial in determining the future of his ventures and their impact on Nigeria’s economy.

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