July 25, 2024
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Aliko Dangote Plans to Establish Oil Trading Arm for Nigerian Refinery

Aliko Dangote, Africa’s richest man, is reportedly considering the establishment of an oil trading arm, potentially based in London, to oversee crude and products supply for his new refinery in Nigeria, according to six sources familiar with the matter.

The move aims to reduce the reliance on major trading firms, such as BP, Trafigura, and Vitol, which have been in negotiations for months to provide financing and crude oil to the refinery in exchange for product exports. Dangote’s 650,000 barrel-per-day refinery is poised to reshape global oil and fuel flows, garnering close attention from the trading community regarding its operational model.

Despite numerous requests for comment, Dangote, whose estimated wealth stands at $12.7 billion according to Forbes, has not responded.

Recent meetings between Dangote and major trading firms in Lagos and London have centered on offering loans totaling approximately $3 billion in working capital required for crude oil procurement, according to trading sources. However, no agreements have been reached thus far, with Dangote expressing concerns over relinquishing control and potential profit reduction.

In a bid to maintain autonomy, Dangote is reportedly seeking to establish an in-house trading team, led by former Essar trader Radha Mohan, who joined Dangote in 2021 as director of international supply and trading. The team is reportedly in the process of recruiting two additional traders.

The completion of the refinery, which spanned nearly a decade and incurred costs of $20 billion, has been marred by delays and budget overruns amounting to $6 billion. While the refinery has processed approximately 8 million barrels of oil between January and February, achieving full capacity will take several months.

Amidst these challenges, trading firms like Vitol and Trafigura have provided interim support, with Vitol prepaying for product cargoes and Trafigura swapping crude oil for future fuel cargoes, according to knowledgeable sources. Both Vitol and Trafigura declined to comment on the matter.

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