The Nigerian Industrial Behemoth That Could Reshape the African Economy

Odd Lots

This episode of Odd Lots explores the rise of Dangote Refinery in Nigeria, one of Africa's largest industrial projects and a potential game-changer for the continent's economic

Key takeaways

• Dangote Refinery represents a breakthrough in African industrial capacity, being the largest oil refinery on the continent and operational despite previous government failures.
• Aliko Dangote's success stems from his ability to execute large-scale projects with precision, leveraging local expertise and strategic partnerships rather than relying solely on foreign capital or technology.

Main topics

• Dangote Refinery and its significance for Nigeria
• Industrial policy in Africa: lessons from past failures and current successes

Notable quotes

'He spent $20 billion. It's east of Lagos, a huge, huge plant. And it worked.' – Joe Studwell

Conclusion

The Dangote Refinery exemplifies how focused industrial policy, local expertise, and long-term investment can transform Africa's economic landscape. While

Transcript preview

Speaker 5 (0:00) Bloomberg Green returns to New York during Climate Week, September 22nd and 23rd, bringing together industry leaders, policymakers, and climate innovators to explore solutions for a more resilient, future-ready world. Powered by Bloomberg's trusted journalism and data-driven insights, discover how climate is reshaping business, technology, policy, and the economy. Presenting sponsor, Hitachi Energy. official airline, Alaska and Hawaiian Airlines. Learn more at BloombergLive.com slash GreenNY Radio. Speaker 6 (0:33) Hello, Odd Lodge listeners. I'm Joe Wiesenthal. And Speaker 4 (0:36) I'm Tracy Alloway. We're Speaker 6 (0:37) the hosts of the Odd Lodge podcast, and we've got something exciting for you. Speaker 4 (0:41) That's right. So one of the best parts of hosting our podcast is we get to actually meet and interact with our listeners. And we know we have some listeners over in Los Angeles. Speaker 6 (0:51) That's right. So if you're in L.A., we're going to be recording a live show, some live recordings at the Vermont Theater in Hollywood on September 17th. We Speaker 4 (1:00) have some really exciting guests lined up. have some really great conversations planned. So go ahead and get your tickets. You can find those over at Bloomberg.com forward slash oddlots or click the link below in the show notes and come and say hi when you're there. Bloomberg Speaker 5 (1:19) Audio Studios, podcasts, Speaker 1 (1:22) radio, news. Speaker 6 (1:34) Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And Speaker 4 (1:40) I'm Tracy Allaway. Speaker 6 (1:41) I don't know what it is, Tracy. I kind of have this urge to do an Africa trip. Like, I sort of want to go to some of these capitals, Lagos, Accra, Kigali, and so forth. Like, I don't know. I'm like, I've never been there, and now I'm like, I'm kind of curious. Speaker 4 (1:56) Well, you know, the urge to explore Africa is well documented among the history of men. Of white men in particular. So really, you're just following your instinct here. That's right. Speaker 3 (2:07) Yeah. Speaker 4 (2:08) I've been to Africa, various places. Morocco, Egypt, Tanzania, Mozambique, South Africa, briefly. I have some insane stories I could tell you. But probably the one thing that stands out to me is the diversity. Of that particular continent, obviously. So Egypt is very, very different to a place like Mozambique. And I will say, you know, like I saw some, a lot of development in places like South Africa, Egypt to some extent. Mozambique was one of the poorest places I've ever seen in my life to the point where a lot of people don't even want money. They would just barter for goods, like an extra t-shirt in your luggage or something like that. Speaker 6 (2:50) It is pretty extraordinary just generally, you know. I think there was, if you had gone back 50 years ago or something like that, you would have had this view that, you know, countries around the world over time converge economically, particularly in a world of free trade. The factories chase the countries that have the cheapest labor, etc. And therefore, everyone in a world of free trade, you get this sort of like broad growth and wealth. But the extremes, you know, of outcomes over the last several decades has been truly extraordinary. Speaker 4 (3:24) Absolutely. So you have places like Nigeria, like Lagos, I think you mentioned, which seems to some extent be booming at the moment with higher oil prices. You have a very, very big IPO coming down the line. Speaker 6 (3:37) Yes. So this is what I'm particularly interested in. I met a listener, a predecessor of mine, a doc, when we were in London a couple of years ago. And he's like, oh, you guys really have to do an episode on this new oil refinery that's being built in Nigeria. Anyway. This is for Speaker 4 (3:57) him. I hope he's listening at this Speaker 6 (3:59) point because... Speaker 4 (4:00) It took two years, but we're doing it. Speaker 6 (4:01) We're Speaker 4 (4:01) doing Speaker 6 (4:01) it because there's the news today that Dangote Refinery, or sorry, the news this week, we were recording this August 20th, came out earlier in the week that they had secured $400 million ahead of planned IPO. that there is $1 billion in backing from a few other firms, and also that the founder of this company, he's also, I believe, you know, he's one of the richest people in the world. And I don't think Dangote is anywhere close to being a household name. Speaker 4 (4:30) No, and it's going to be the biggest stock market listing in African history ever. So we should definitely talk about it. And I think it's good to talk about it in the context of why development in Africa has... or hasn't happened in certain cases. Speaker 6 (4:43) Absolutely. Well, I'm very excited to say we really do have the perfect guest, someone we've never talked to on the podcast before, but it was probably an error because someone who's writing and thinking has been very influential to people of our cohort over the last several years who are interested in things like industrial policy and so forth. We are going to be speaking with Joe Studwell, Senior Fellow at the Africa Urban Lab, Senior Visiting Fellow at ODI Global, and the author of the recent book, How Africa Works. And of course, many readers may have read his previous book, How Asia Works, talking about how some of these East Asian economies got as wealthy as they did. So, Joe, thank you so much for coming on Odd Lots. Speaker 8 (5:26) Oh, well, thank you for having me. Speaker 6 (5:27) Let's start with a simple question. What is this company, Dangote, and who is the founder? Speaker 8 (5:35) So Aliko Dangote is from Kano in the north of Nigeria. He's a Muslim trader, archetypal Muslim trader. He grew up trading soft commodities, got a substantial business doing that. And then he went under the presidency of Obasanjo. to the government and negotiated a deal where he'd get four years of protection as a monopoly importer of cement, which was not then made in Nigeria, in return for creating local cement production. And he did that. But not only did he do that, he went on to do it across Africa. He's in a dozen countries doing cement now, and he's beaten in most places. Speaker 8 (6:23) the multinational cement producers like the Swiss Holcim and whatever who previously dominated the business. So that was the first thing that he did that people really kind of sat up and said, wow, this guy has got something. And then he decided he'd do something much bigger. And he decided he would build an oil refinery. in a country where a couple of times previously government had tried to develop refining capacity and it was just a disaster, an industrial policy disaster. Dangote did it. He spent $20 billion. It's east of Lagos, a huge, huge plant. And it worked. It is working. And not only that, he's expanding it now. So in the course of doing that, he became the richest guy in Africa. But he doesn't stop because he's developed such capability in terms of project management and project delivery that he just goes on to other things. So next to his oil refinery is a very large urea plant, fertilizer plant, which is now supplying the majority of fertilizer consumed in Nigeria. And he's recently signed up to do the same thing in... in Ethiopia, the second most populous African country after Nigeria. And yeah, he just keeps rolling forward. And so this listing, I think, will be pretty heavily oversubscribed because it's investor access to the first real quality listed industrial asset pack on the continent. Speaker 4 (8:12) I have a, this is just a sort of tangential question, but you mentioned that he was first in cement production. Why does cement production seem to be such a thing in developing nations in particular, such that if you go to a place like Nigeria or like Myanmar, you will see a lot of ads for different cement brands and it feels like everyone is producing cement? Speaker 8 (8:36) Yeah, because it's so fundamental to development. I mean, development is about investment, construction, creation of physical assets. And so cement is just absolutely fundamental. Speaker 4 (8:49) Okay, a serious question now then. So what does the Dangote example actually say about, I guess, the diversification prospects for Africa? Because when I think, okay, it's a petroleum refinery that, you know, urea production, that's kind of industrialized, but it's also very connected. to resources, right? And we've all heard about the resource curse. We know that various African nations have experienced it to some extent throughout time. So how much of this is actually an industrial success story versus like kind of more of the same? Speaker 8 (9:27) I would say it's different to what we saw in the past in Africa. So Africa has a reputation of having tons and tons of hydrocarbons and minerals, resources. It's not really true, actually. We just perceive Africa that way, because in the past, there wasn't much other economic activity. So it seemed like minerals and hydrocarbons were dominant. But if you compare it with somewhere like the United States, and you look at what African countries have got. It's nothing like the mineral and hydrocarbon resources as a share of GDP. So I would say that it's different to what we had in the past because You look at all of Dangote's businesses and it's really a demand-driven story. And what I mean there is that the growth of population and the growth of population density in Africa is now creating markets, particularly urban markets, of a type that we just didn't have before. And so you build your cement plants and the demand for what you're producing is just massively. greater than it was in the past. The same for refined oil products, the same for fertilizer. Africa as a continent now has 1.5 billion people. That's about the same population density as Asia in 1960. So it's still not very densely populated, but it is when you compare it with immediately after the Second World War when Africa had 220 million people. So it's gone from 220 million to 1.5 billion. And when after the Second World War, Africa had 220 million people, that was the same population density as Europe in 1500. And that, to me, is the fundamental reason why you didn't have a lot of economic growth. Speaker 6 (11:18) How does population density, per se, play an important role in a country's capacity to industrialize? Speaker 8 (11:26) Yeah, I mean, for all the reasons that you would expect, I've already talked about markets, you've got to have markets for what you're going to produce, particularly urban markets are very important. Urban markets are also important because cities produce most of the tax that is paid in any country. Then you've got to think about infrastructure. Every society requires a lot of investment in infrastructure. The cost of infrastructure is determined fundamentally on a per capita basis, or its affordability is determined on a per capita basis. Until you've got the people, you're not going to be able to afford it. And then there are questions of division of labor. When you get concentrated populations in cities, you get much better division of labor, much greater specialization, and in turn, you get much greater creativity. Speaker 8 (12:14) So, you know, the famous statistic that's always rolled out is that 80 % of GDP around the world is created in cities. Speaker 6 (12:25) Yeah. Speaker 8 (12:25) Even though they don't occupy that much physical space. In the Africa book, I use the example of the UK where one city, London, generates 70 % of the UK's fiscal surplus. You have London and the southeast region of the UK are the only two parts of the UK that produce a fiscal surplus. Seven other regions of the UK are all in fiscal deficit and essentially are subsidized by the most densely populated part of the country. Speaker 3 (13:12) I'm Molly Graham, host of Work Life, a podcast from TED. The most important lessons about work usually aren't the ones anyone teaches you. They come from experience, from uncertainty, from figuring things out as you go. On this show, my expert guests and I explore how careers really unfold through change, through doubt, through the decisions that shape who we become over time. Because those moments aren't the exception. They are the work. Listen to Work Life wherever you get your podcasts. Speaker 4 (14:06) populated areas on the continent for a while, but it has actually, I think, underperformed relative to a lot of other countries. So what does that say about the importance of population density? Speaker 8 (14:18) So you're right. Nigeria is about 250 people per square kilometer, which is significantly higher than the African average today. I wouldn't say, though, that it has overall underperformed in the period since 2000, when the whole African economy has picked up. Nigerian agriculture, which is the thing I would expect to show growth first as population grows. Because poor people will just eat more. I mean, that's the first thing they do. They consume more. More in the way of foodstuffs. Nigerian agriculture since 2000 has been growing close to 6 % a year. That's faster than anywhere that I'm aware of in Asia, faster than someone like China. So things are moving. They're not moving crazy fast because Nigeria is a pretty dysfunctional country at