Economy
Dangote Refinery Seeks Loans to Boost Production Capacity
By Adedapo Adesanya
The biggest crude oil refinery in Africa, Dangote Refinery, is seeking to raise capital to ramp up production at the 650,000 barrels per day facility in Lagos.
According to Financial Times, the refinery, operated by Africa’s richest man, Mr Aliko Dangote, is negotiating with a mix of commercial lenders, development banks, oil traders, and other key industry players to raise the necessary funds to ensure a stable and sustained crude oil supply for the refinery.
The $20 billion facility, which produces petrol, diesel, and other fuels, has not been able to operate at maximum capacity due to several limitations.
The refinery has been touted to change the country’s energy use by eliminating the need to import petroleum products.
Dangote Refinery, which began production earlier this year, is already producing 420,000 barrels per day and has set a new target to reach full capacity by mid-2025.
In September, the plant started producing jet fuel and naphtha, followed by petrol production in October.
However, financing challenges have led to delays in meeting previous targets.
It has also faced hindrances from the Nigerian National Petroleum Company (NNPC) Limited, the country’s state-owned oil corporation, which is supposed to supply a significant portion of the crude needed.
NNPC’s stake in the refinery has been reduced to 7.2 per cent after it failed to meet the payment schedule for a deal valued at $2.7 billion.
The state oil firm paid an initial $1 billion in 2021, but it has not been able to cover the remaining $1.76 billion, which was to be paid in crude supplies.
Dangote Industries has already procured crude from international suppliers in the US, and Brazil, and is exploring deals with African nations like Libya and Angola to meet its growing demand.
In recent meetings, Dangote sought assurances from President Bola Tinubu and Mele Kyari, the CEO of NNPC, to ensure a reliable supply of 365,000 barrels per day of crude, to be paid for in Nigeria’s increasingly devalued currency, the Naira.
In December 2023, the Africa Finance Corporation (AFC), a pan-African development bank already invested in the refinery, led a financing round to help the project get off the ground.
However, as the refinery’s production ramps up, Dangote is now faced with the challenge of securing additional funds to cover both crude procurement and the refinery’s operational costs, which could reach approximately $2 billion every 90 days for a minimum supply of 300,000 barrels per day.
With Nigeria’s weak currency, there have been worries that the refinery will face increased challenges.
One of the sources quoted by the publication said, “The refinery was built over budget, and the Naira, which is a major currency of future revenue, has devalued massively.”
However, Dangote said it remains committed to using the refinery to meet Nigeria’s entire demand for petrol, which he estimates at 30 to 35 million litres per day.
By Adedapo Adesanya
The Central Bank of Nigeria (CBN) has granted Bureaux de Change (BDC) operators temporary access to the Nigerian Foreign Exchange Market (NAFEM), which is the official market, as part of efforts to further strengthen the Naira in the currency market.
The CBN in a notice on Friday said BDC operators would have access to FX at the official market from December 19, 2024, to January 30, 2025, with a weekly cap of $25,000.
Transactions require upfront funding at prevailing rates and must follow a maximum of 1 per cent spread.
The Naira traded at the spot market at N1,541.38/$1 based on computation on the Bloomberg BMatch system computed by FMDQ Securities Exchange Limited.
The CBN recently launched the Electronic Foreign Exchange Matching System (EFEMS) to build transparency in the system, but this excluded street forex hawkers. This initiative has fortified the value of the Naira against the US Dollar at the official market.
The platform, which became operational on December 2, 2024, has enhanced operational efficiency in Nigeria’s FX market, with banks mandated to be on the system to trade forex.
The EFEMS initiative, according to Mrs Omolara Duke, the CBN’s director of the financial markets department, was designed to ensure “transparent, fair, and efficient FX trading, minimise counterparty risks, and enforce compliance with CBN regulations.”
Between December 2 when the new electronic trading platform commenced and December 19, 2024, the Naira recorded over N250 gain over the Dollar in the official FX market.
The CBN also issued comprehensive guidelines for the operations of the interbank foreign exchange (FX) trading system via EFEMS, pegging the minimum tradable amount at $100,000, with incremental clip sizes of $50,000.00, to promote transparency and efficiency in the FX market.
This development has forced currency speculators and illicit market operators to look elsewhere, pushing up demand to the parallel market and the BDCs.
To further ease the pressure on these unregulated markets, the CBN will allow BDCs to access the market with the hope of checking demand and further supporting the Naira.
By Adedapo Adesanya
A recent survey by the Central Bank of Nigeria (CBN) says businesses have projected depreciation of the Naira in the first three months of 2025.
In its Business Expectation Survey Report for November 2024, the CBN said despite this expectation, there are several businesses which expressed optimism about the macroeconomic environment.
The report noted that firms’ outlook on the volume of business activities, financial conditions, access to credit, volume of total orders and average capacity utilisation, were pessimistic.
“The overall confidence index (CI) on the macroeconomy indicated that businesses were optimistic in November 2024.
“Businesses expect the Naira to depreciate in the current month, next month and next 3 months but appreciate in the next 6 months,” the report said.
“The optimism on business outlook in the current month is driven by the opinion of respondents from all the sectors.
“The Construction Sector expressed optimism on its operations in the review month.
“The outlook of respondents on the volume of business activities, the volume of total orders, financial conditions, and access to credit were negative in the review month. the volume of business activity respondents expressed optimism on the volume of business activity for the next month and subsequent periods under review,” it added.
The report also showed that businesses hope to employ more workers in the month of December 2024 with the agriculture sector having the highest prospect for expansion.
Meanwhile, the CBN in its latest Consumer Expectation Survey Report said that consumers were pessimistic about the macro economy in November.
According to the CBN report, households projected a rise in the cost of transportation, rent, car/vehicle, house purchase, and medical expenses this month.
The report showed that 61.1 per cent and 57.6 per cent of respondents perceived that prices of non-durable and durable household items, though high, will keep declining this month and next month respectively.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.46 per cent gain on Thursday, December 19, boosted by three stocks, which closed higher at the close of transactions.
Nipco Plc improved its closing price by N13.64 during the trading day to N150.10 per share compared with the preceding trading day’s N136.46 per share, Geo-Fluids Plc gained 33 Kobo to end the session at N3.88 per unit versus Wednesday’s closing value of N3.55 per unit, and UBN Property Plc appreciated by 16 Kobo to settle at N1.89 per share, in contrast to midweek’s closing price of N1.73 per share.
On the flip side, Industrial and General Insurance (IGI) Plc depreciated by 1 kobo to trade at 17 Kobo per unit compared with the preceding trading session’s 18 Kobo per unit.
At the close of business, the market capitalisation of the bourse increased by N4.73 billion to finish the trading day at N1.034 trillion compared with the midweek trading session’s N1.029 trillion.
In the same vein, the NASD Unlisted Security Index (NSI) went up by 13.77 points to wrap the session at 3,017.07 points compared with 3,003.30 points recorded in the previous session.
On Thursday, the volume of securities traded by investors surged by 603.9 per cent to 2.3 million units from the 59.624 units recorded a day earlier.
However, the value of shares traded yesterday slumped by 48.9 per cent to N2.3 million from N4.6 million as the number of deals declined by 12 per cent to 22 deals from the 25 deals carried out on Wednesday.
Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units worth N3.9 billion, followed by Okitipupa Plc with 752.3 million units valued at N7.8 billion, and Afriland Properties Plc with 297.7 million units sold for N5.3 million.
Aradel Holdings Plc also remained the most active stock by value (year-to-date) with 108.7 million units valued at N89.2 billion, trailed by Okitipupa Plc with 752.3 million units sold for N7.8 billion, and Afriland Properties Plc with 297.7 million units worth N5.3 billion.
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