It was hailed as the best thing to happen in the oil and gas sector especially in Nigeria – a serial importer of crude products. The year was 2013 and in September of that year, Aliko Dangote, Africa’s richest man, announced yet another of his gargantuan projects – the construction of the biggest single train refinery in the world with production expected to begin in 2016. Many delays and postponements later, the project has been bogged down by barely serviceable debts, poor planning, lack of centralized project management, mismanagement and has now become a huge albatross on Nigeria’s neck costing the country lots of FX and creating huge problems in return.
A project that started as a 9billion dollars project is now being valued at over 16 billion dollars, albeit incorrectly. Sampling expert opinion from leading players in the oil & Gas industry, it is estimated that a refinery of that size should ideally cost within the range of 11 to 12 billion dollars to build in Nigeria. Notwithstanding the conflicting figures, it was recently announced that the Nigerian National Petroleum Corporation, NNPC, will be taking a 20% stake in the uncompleted, non-functional Dangote Refinery at the cost of 3.8billion dollars. Whilst this baffled many, NNPC’s actions effectively over-valued the yet to be completed refinery to 19billion dollars.
PROJECT DELAYS OR PROJECT DELAY-ED
As at last count, the completion of the refinery had been moved eight times. Whilst some might say this is in character for Dangote Industries and their numerous projects across different sectors, the problem is deeper rooted. A contractor at the delayed refinery project, speaking under the condition of anonymity said that poor planning, underpayment of contractors, and a lack of proper project management with over 40 contractors on site has led to most of the delays. He also added that of the 40, none is willing to commission as there is no clear delegation of duty and over-decentralization leading to absolute chaos.
With these incessant delays, Banks are already calling in their loans. At the announcement of the project in 2013, Mr. Dangote said he had secured financing of 3.3billion dollars. This debt burden has now risen to 7billion dollars with debt servicing of almost 700million dollars per annum. Whilst Mr. Dangote has been able to restructure the facilities from various local and international banks twice so far, most banks have totally refused to restructure for the third time with Read More
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