09 September 2013, Lagos – The $3.3 billion syndicated loan secured by Dangote Industries last week to build a 400,000-barrel per day oil refinery and petrochemical plant is said to have a seven-year pay back period. A banker who was part of the negotiation disclosed this, saying that Dangote Group may have to work extra hard to meet the payment terms in the loan agreement documents.
According to the bank executive, looking at the Nigeria business environment and infrastructure challenges, the pay back period is a huge task considering the fact that the group has to begin the payment after three years. He said the work on the refinery has to be completed on schedule for the group to succeed.
The loan was signed off last week Wednesday but the tenor was not officially disclosed. Standard Chartered and Guaranty Trust Bank led the loan deal, which also involved two South African and eight Nigerian banks. A spokesman for Dangote Group, the umbrella company, Aliko Dangote, had told Reuters on Friday that the loan was “medium term.”
Dangote Group intends to put $3 billion of its equity into the project it said, down from a previously planned $3.5 billion. It is seeking a further $2.25 billion from development funds for the $9 billion plant project, which will also produce fertilisers.
Nigeria imports 80 per cent of its fuel needs and the lack of refining capacity is a major brake on the nation’s economy. A boost to Nigeria’s refining capacity will be a blow to European refiners and oil traders, which make huge profits bringing fuel into the country. The company expects the refinery to be completed around 2016.
Dangote Group had last week made history with the signing of a combined $ 9.05 billion facility agreement with a consortium of local banks and international investors for the establishment of its Refinery/Petrochemicals/Fertilizer complex.
Under the agreement signed at a crowded ceremony in Abuja, a $ 3.3 billion medium term loan would come from local banks and international finance organisations; $2.25 billion from the Economic Commission for Africa, ECA, and Dangote’s equity contribution of $3.50 billion. The Central Bank of Nigeria, CBN, will also make a contribution of N50 billion with interest rate of 7 per cent and to be repaid in 15 years.
Chairman, Dangote Group, Alh. Aliko Dangote, described the complex to be located at the OKLNG Free trade Zone, as the largest industrial complex in Nigeria’s history and that he embarked on the project as a demonstration of his confidence in the Nigerian economy.
“As an investor who believes in Nigeria, knows Nigeria well and whose prosperity was made in Nigeria, we have responded to the challenge with our decision to invest $ 9 billion in a refinery/petrochemical and fertilizer complex to be located at the OKLNG Free Trade Zone. This complex will be the largest industrial complex project ever in the history of our great nation. “
Alhaji Dangote revealed that the project had effectively taken off, with the award of the Engineering, Procurement and Construction (EPC) contract to Saipem of Italy for the fertilizer plant. He added that the Basic Engineering Design and optimisation for the refinery has also been awarded. When completed, the chairman said, the fertilizer plant would produce 2.75 metric tons per annum of urea and ammonia; while the refinery would process 400, 000 barrels of crude oil per day.
The refinery would produce a higher grade of premium motor spirit, popularly known as petrol, compared to what is currently being imported into the country.
According to him, in addition to high grade petrol, the refinery would produce diesel, aviation fuel, household kerosene, slurry as raw material for carbon black, as well as 650,000 metric tons of polypropylene per annum.
The industrialist said that his mission was to reverse the current situation in which Nigeria has not only become a net importer in her trade relations with nations of the world but also of products for which it has comparative advantage. His words; “Our mission is to through industrialisation, reverse the historical trend of the export of foreign exchange and jobs and replace it with foreign exchange conservation and job creation.”
He promised to replicate his success story in the cement industry where he has turned the nation from an importer to a current level of self-sufficiency and with potentials for exports within a short while.
Alhaji Dangote added that the recent discovery and development of the shale oil and gas in “our traditional markets has further stressed the urgent need for us to diversify our economy on a fast track in order to avoid a reversal of the current steady improvement in all indices of economic performance.”
The Dangote complex is expected to reduce products costs, increase industrialisation and improve the general well-being of the people, particularly farmers who have been yearning for fertiliser to boost their outputs, across the country.
If the refinery and the petrochemical plant come on stream, “Nigeria will reclaim its place of pride as one of the largest exporters of fertilizer, refined products and other petrochemical products, to consolidate on its efforts in ensuring the rapid development and the contribution of Africa to the global economy.”
*Omoh Gabriel, with Agency report