Africa’s benchmark challenge

When drivers have to queue for hours to fill their cars amid a crippling fuel shortage in Africa’s largest oil producing nation, it is clear that something has gone wrong.

May’s fuel crisis in Nigeria, whose repercussions are still being felt, had much to do with unpaid subsidies and a system riddled with inefficiencies and graft, but also with regulatory issues replicated in other African countries where pricing is linked to outdated models. Markets change and evolve, but many of the fuel price formulas used in Africa are relics from earlier times, based on benchmarks that lack liquidity, transparency or relevance.

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Greenfield of dreams

“How can we expect others to invest in Africa if we don’t do it ourselves?” Thus asks Africa’s richest man, Aliko Dangote, via his executive director Mansur Ahmed.

Speaking to the African Refiners Association’s annual gathering in Cape Town, Ahmed said that the Dangote Group’s ambitious 500,000 b/d refinery project was about to break ground in Lagos, Africa’s most populous city, to be completed in the third quarter of 2017. Dangote is confident that, if they build it, investment will come. “When the refinery is operating profitably and well, we may float it in the stock market. But, initially, equity gives you the strongest opportunity to establish early profitability,” Ahmed says.

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