Dangote Refinery: Any Hope for Survival?

Jimoh Ibrahim

The first $15 billion was already spent on Nevada’s Yucca Mountain megaproject until the Obama administration scrapped the project! A total of $65 billion, including damages, was spent on Yucca, and the ground was covered back without a project after spending $65 billion! Nigeria’s Government has in stock 11866 abandoned megaprojects, three of which account for about 60% of the national debt. For Ajaokunta Steel, the government spent $10 billion on the project and was on-site for 42 years, and no steel was produced!

The iron law of megaprojects is cost overruns, schedule delays, and benefit shortfalls over and over Again. A megaproject is considered a project in which at least $1 Billion and above is expected to be invested. It is usually not an ordinary project. Megaprojects typically come with converging complexities. It is simply the converging complexities that Dangote is facing, with megaproject you must keep explaining! He must contend with cost overrun (it is different from what you think the project will cost that you will spend! You find that in Dangote refinery!). You must prepare for the scheduled delays (it was different from when you planned to commission the project that you will commission, for you keep rescheduling the commission date if you ever commission it! Dangote shifted his commissioning date of the project many times). You will see benefit shortfalls (it is not when you think the project will benefit the society and yourself that you will get benefits! Dangote is at a loss on where his project’s benefit is). If you know all of this, you will understand the Dangote refinery project. This underscores the need for meticulous planning and execution in megaprojects, mainly operational cash flow if you ever complete the project!

It is the usual case of blind men with elephant projects. Six blind men were asked to describe an elephant after touching it. This is how they represent an elephant. The first man touched and felt the broad and sturdy side and described the elephant as a wall; the second man felt the tusk and thought the elephant was a spear; the third man felt the trunk and thought the elephant was a snake; the fourth touched the knee and felt the elephant as a tree, the fifth felt the ear and described the elephant as a fan, and lastly the sixth felt the tail and thought the elephant was a rope. Who among them successfully described an elephant? That is what megaprojects look like. In Britain, where finance is never an issue, the Cross Rail project rose from £825m to £18.599 billion! (cost overrun). The public sector investment is estimated to be $9 trillion annually or approximately 8% of the global gross domestic product (GDP) on megaprojects. For example, programme spending was recorded at £420 billion in the United Kingdom in 2013. This history of megaprojects underscores the importance of learning from past mistakes to inform future decisions.

President Obasanjo’s experience after securing $675m for building the Ajaokunta steel company is here. Just after the handover to President Shagari, a representative of TPE came to meet Obasanjo in his retirement home with the complaint, “Mr President, you did not hand over well”. The president asked why he felt that way, to which the man replied that the minister of mines and steel was demanding a bribe. The minister had refused to sign the certificates of completion of jobs, which were needed for payment. However, they could not pay any bribe from their contract sum since the payment for the contract was from Russia. “We do not have control over such payment since the bribe payment is not part of the bid.” In sum, the project was blocked because of a “lack of enthusiasm for it,” which resulted in the project no longer being given sufficient priority. Obasanjo spoke to his successor, Shagari, but did not know whether Shagari ever pushed for completion.

Yes, Dangote may be looking forward to assistance from the Federal government or NNPC with operational cash flow or the completion of the remaining 55% of the refinery project in whatever manner; let’s forget about operating the refinery in the free zone area, but selling products domestically we can let go things like tax issues but in any event, President Tinubu must not forget the 11866 abandoned megaprojects and specifically the Ajaokuta (since we now use 25% of our budget on importation of steel). Again, the only connection is the Second Niger Bridge of Nigeria with the people from the East. Megaprojects failed Innovative China; the Guinness Book of Records described the failed China 117 towers as the tallest unoccupied building in the world! Less complicated Yanqiapu (another China megaproject) failed after the Chinese government spent $50 billion. The converging complexities of Megaprojects usually make a big project too big to succeed!