Afreximbank and Dangote join forces to reshape Africa's industrial future

Since independence, the economic model for most African countries has largely rested on exporting their considerable resources in the raw state, while importing finished products fashioned out of those same raw materials. In practical terms this has meant that value from Africa’s resources is captured elsewhere, along with the growth, jobs, technology and industrial capacity that could have come from processing the continent’s resources locally. Nigeria offers one of the starkest examples of the downsides of this approach. Despite being the continent’s largest oil producer, Nigeria has for years been its largest importer of refined petroleum products, exporting crude oil only to buy back petrol, diesel and aviation fuel at far higher prices. This was the cycle that the Dangote Group sought to break by building a refinery with 650,000 barrels per day capacity in Lagos, Nigeria’s commercial capital. Breaking that pattern required more than ambition and technical expertise. It demanded enormous financial backing, long-term confidence and institutions willing to support such a project. That role fell to the African Export-Impact Bank (Afreximbank), which has provided close to $10bn in financing since the project’s inception. Aliko Dangote, chief executive officer of Dangote Group, lays out the logic behind the project. “We don’t want to be taking our raw materials out for someone to process them and bring them back and for us to pay 12 or 15 times the price.” Exporting raw materials and importing finished products, he has pointed out, essentially means exporting wealth and importing poverty. Dangote describes the refinery project as the biggest risk of his career. “We took up a challenge to build 650,000 barrels of refinery, which is 50% bigger than any other single refinery. And then we also took the challenge of being the EPC [engineering, procurement, and construction] contractors. We did it on our own,” he recalls. The personal stakes could not have been higher. “If it hadn’t worked out, I would have actually lost everything.” The refinery required billions of dollars in long-term investment, precisely the kind of financing that commercial lenders are often reluctant to provide for transformational infrastructure projects. Refineries in Africa are typically built by governments and privately operated ones are much smaller than what the group envisaged. Breaking the raw-materials cycle Which is why Afreximbank’s backing was so essential. Rather than viewing the refinery simply as a commercial investment, the bank recognised its wider strategic significance for Africa’s industrial future, aligning with its broader objective of financing industrialisation, increasing value addition and reducing Africa’s dependence on imports. “When you see a visionary person who is ready to tackle a problem that we ought to deal with, then we have to ensure that that vision matches with capital,” explains Kanayo Awani, the bank’s executive vice president of the Intra-African Trade Bank. The refinery’s expected impact extends well beyond fuel production. It is contributing to Nigeria’s energy security. According to David Bird, CEO of Dangote Petroleum and Petrochemicals, the refinery can meet “more than 100% of Nigeria’s total gasoline, diesel and jet requirements”. This will be a huge fillip to an economy that, despite being the second largest in Africa, is generally believed to be held up by persistent energy challenges. The impact is already being felt by consumers, who have seen prices drop while supply remains constant. One customer recalls that, before the refinery, “people queued for days, sleeping at the stations to get their cars topped up.” Since its opening, he observes, the queues have vanished. Lower fuel costs also have implications for the cost of living. Transportation, food prices and industrial production are all affected by the cost of fuel; with prices dropping by as much as 16%, the refinery will almost certainly lead to lower prices and help curb inflation. “Afreximbank did not only finance the refinery, they also financed the urea plant,” Dangote notes; the fertiliser plant attached to the refinery is now among the world’s largest, supporting agricultural productivity while reducing Africa’s dependence on imported fertilisers. Devakumar Edwin, vice president of the group, points out that changing global environmental conditions favour the continent. “The availability of arable land is coming down globally. Availability of water is coming down. Only Brazil and sub-Saharan Africa have enough arable land and more than enough water,” he says. Agriculture could thus become one of the biggest growth sectors in Africa. Edwin says the continent could become “the breadbasket for the whole world,” which will be contingent on having reliable fertiliser supplies in the region, such as Dangote fertiliser. The refinery has also been designed with environmental efficiency in mind, with energy efficiency forming a central part of its design, according to Bird. “We will be the most energy-efficient refinery in the world on a per-barrel basis,” he says. Domestic refining also reduces emissions associated with shipping crude oil overseas for processing before transporting refined products back to Africa. The result, according to the refinery, is the elimination of more than 1m tonnes of carbon dioxide emissions annually. The refinery also demonstrates how major industrial investments create ripple effects throughout the economy, including with job creation. Bird says 3,000 have already been taken on to support the refinery’s operations. “The opportunity for training, skills development and highly paid, highly skilled permanent jobs is immense.” Financing Africa’s industrial ambition Perhaps the refinery’s greatest significance lies in what it says about Africa’s ability to finance its own transformation. For decades, many of the continent’s largest industrial projects depended almost entirely on external financing. The Dangote Refinery showcases a different model, with African entrepreneurs working alongside African financial institutions to deliver globally significant infrastructure. Dangote believes that this sends an important signal to international investors. “What attracts a foreign investor is a domestic investor. When the domestic investor risks his own capital, then the foreigners will come and partner with you,” he argues. By backing the refinery, Afreximbank effectively validated that confidence. Its participation helped mobilise additional investment while demonstrating that African development finance institutions can support projects of global scale. Ultimately the refinery embodies a broader vision of African industrialisation. “We want to industrialise not only Nigeria,” says Dangote. “We want to industrialise Africa.” That ambition aligns closely with Afreximbank’s own mission of supporting intra-African trade, expanding manufacturing and strengthening regional value chains. For the bank, projects like the Dangote Refinery are not isolated investments. They are the building blocks for the African Continental Free Trade Area, enabling countries to process more of their own resources, trade more value-added products and reduce dependence on external markets. As Awani observes, “Africa is wealthy, but the wealth is in raw commodities. It’s in minerals.” The challenge has always been converting those resources into industrial prosperity. Through the refinery project, Dangote and Afreximbank are showing that it is possible to add value to those minerals, spurring industrial renewal, creating jobs and ultimately, making goods cheaper and lives better in Africa. Awani states the case clearly: “Africa can build, can finance world-class programmes and projects like anywhere else in the world. The Dangote Refinery is a source of pride for Africans. And yes, indeed, we can take our destiny in our hands.”