Artificial intelligence may be the flavor of the month on Wall Street, but Africa’s most-anticipated initial public offering is by a firm that makes tangible products: diesel, gasoline and jet fuel.
Tycoons in Nigeria and residents of Texas are among those lining up to buy a stake in billionaire Aliko Dangote’s oil refinery. Their enthusiasm says as much about Africa’s capital markets as it does about the continent’s biggest industrial project.
Dangote Petroleum Refinery and Petrochemicals hasn’t provided details on the share sale, but it is expected to raise as much as $2 billion. The IPO will be a rare market debut for an industrial asset of this scale in Africa.
It will be a once-in-a-generation test of whether investors will back local businesses after years of volatility that pushed many away from equities.
The timing is key. As geopolitical tensions redraw global energy trade, the $20 billion facility has become one of the continent’s most strategically important assets.
The 650,000-barrel-a-day plant reached full capacity just before conflict in the Middle East heightened concerns over fuel supplies and it quickly became a major exporter of refined products to Europe. Dangote plans to use the IPO proceeds to further expand capacity.
Nigeria’s stock market remains shallow relative to the size of its economy, and a successful listing could broaden the capital base and provide a blueprint for financing industrialization.
The authorities are allowing retirement funds to participate in the IPO, while brokerages have reported a surge in interest from first-time investors.
There are risks, for sure. Refining margins are cyclical, the business has a short operating history and memories of Nigeria’s 2008 stock-market collapse still linger.
Yet if the refinery (and the IPO) delivers on its promise, it may mark a profound shift.
It would signal a transition from exporting raw materials to building wealth through industrial assets owned, increasingly, by Africans themselves. — Arijit Ghosh
Source: Next Africa
