Sopuruchi Onwuka

Dangote Refinery’s planned listing on a United States stock exchange could become the next major test of investor confidence in Africa’s biggest private industrial project, following its $1.6 billion Initial Public Offering (IPO) on the Nigerian Exchange.

In Nigeria, the refinery’s IPO is sold to the people as a vehicle of empowerment for millions of Nigerians currently suffering the full impact of domestic fuel market liberalization, a reform initiative that withdrew decades old fuel subsidy and triggered inflationary trends in the economy.

The proposed US listing, targeted for the next three to four years, is expected to coincide with the refinery’s expansion from its current 700,000 barrels-per-day capacity to 1.4 million bpd by early 2029. Founder Alhaji Aliko Dangote said the company would “most likely” seek a US listing as the expansion progresses.

For investors buying into the Nigerian IPO, the proposed international flotation introduces a potentially significant future valuation outcome.

Oracle Intelligence reports that part or all of the proceeds of the Nigerian IPO will be invested into financing the refinery’s expansion programme, pushing crude oil processing capacity from current 650,000 barrels per day to 1.4 million barrels per day. The expansion plan holds potential for significant share value appreciation while flotation of the same shares on more robust US bourses points to dilution of value.

While the planned US listing  could broaden the refinery’s access to dollar-based institutional capital and improve the visibility and liquidity of its shares. But it could also expose the company to a deeper and more demanding market in which valuation would be tested against global refining margins, earnings, capital requirements and the performance of comparable energy companies.

The refinery built with internal and external debt capital of $20 billion is currently valued at about $50 billion, more than twice its construction cost.  The valuation therefore embeds substantial expectations about the company’s ability to expand production, increase sales and convert its dominant position in Nigeria’s fuel market into a broader African business.

The company reported $13.9 billion in half-year revenue so far in the year, and has projected annual revenue growth through 2030, assuming that additional refining capacity will drive higher sales.

It is not clear whether the current valuation metrics consider of the emerging refining renaissance in the domestic petroleum industry where small scale refineries have already laid out growth plans, and old refinery rehabilitation and new medium scale refineries are under projects stages to dilute Dangote’s dominance in the African refinery landscape.

Calculations by Oracle Intelligence show that cumulative domestic refining capacity could reach over 3.0 million barrels per day when all refinery development and revamp projects are delivered and commissioned by 2030.

This outlook partly explains why US listing could give Dangote Refinery access to a much larger pool of institutional investors than is available on the Nigerian Exchange which, by all indications, will continues to host emerging refining companies in the short to medium term.

Thus, a US listing could provide greater dollar liquidity, potentially deepen trading in Dangote shares and bring the company within the investment universe of global funds that have restrictions or preferences relating to US-listed securities.

At 1.4 million bpd, Dangote Refinery would become the world’s largest refinery, overtaking India’s Jamnagar refinery owned by billionaire Mukesh Ambani. Its capacity would also be roughly equivalent to 10 per cent of total US refining capacity.

That scale could alter the company’s perception from Nigerian focused business operating in a difficult emerging market to a large global refining and downstream energy business with substantial physical assets and access to one of the world’s fastest-growing fuel markets.

Beyond Nigeria, the Plans by the Dangote Group to inject significant combined 30 billion in Nigerian expansion and greenfield development in Kenya could reinforce that narrative that the group is evolving into an international refining conglomerate with strong potential for enhanced output volumes, revenue and cash flow.

A US listing could therefore create a second valuation window for shareholders who enter through the Nigerian IPO. A new listing on a stronger bourse points to the possibility that international investors will attach a higher multiple to a company that has demonstrated operational scale, earnings growth and geographic expansion.

But the same listing could expose valuation risks; as the potential upside comes with an equally important question of what happens if US investors do not accept the valuation embedded in the Nigerian IPO?

At about $50 billion, the refinery already carries a valuation substantially above its construction cost, implying that the company’s future performance will be important to sustaining investor expectations.

A US listing would subject Dangote Refinery to a much broader peer template with which investors would be able to compare its earnings, margins, debt, capital expenditure, cash generation and shareholder returns with those of major international refining and energy companies.

Again, Oracle Intelligence enquiries yielded, the company’s larger scale would not automatically translate into a higher share price because refining is a cyclical business, with profitability affected by crude oil prices, product prices, refining margins, freight costs, exchange rates and regional demand.

A refinery can increase its physical output without generating a proportionate increase in profits in a competitive market environment if margins deteriorate or operating and financing costs rise.

The planned expansion itself will also require substantial capital; and investors would assess whether the additional 700,000 bpd capacity generates sufficient incremental earnings to justify the investment required to build and operate it.

It is in the foreground of the emerging scenario that the proposed US flotation could be interpreted as a valuation reset rather than merely a valuation uplift.

Again, Dangote’s experience could also test whether international investors are prepared to value a large African industrial company primarily on its assets and earnings rather than its geographical location. This comes from the background that African companies have had mixed experiences in US capital markets.

Jumia’s 2019 New York Stock Exchange debut initially attracted strong investor enthusiasm and reached a record high valuation in the months after its IPO. Its shares subsequently fell sharply and now trade roughly 75 per cent below their IPO price.

Meanwhile, commodity companies such as Sasol, AngloGold Ashanti and Gold Fields have accessed US investors through American Depositary Receipts (ADRs). Their securities, however, remain heavily influenced by movements in underlying commodity prices.

Those precedents do not determine what would happen to Dangote Refinery but they illustrate the difference between securing an international listing and sustaining an international valuation.

The Nigerian IPO could initially benefit from the refinery’s strategic importance, scale and dominant position in Nigeria’s downstream market.

Since commencing operations in September 2024, the refinery has become a major supplier to the domestic petroleum market. Its ability to displace imported refined products and subsequently increase exports could support revenue growth as capacity rises.

However, the proposed US listing would shift the emphasis from the refinery’s strategic importance to measurable financial performance.

Investors would increasingly ask whether the company’s growing capacity is producing commensurate earnings, whether cash flows can finance future expansion, how much debt the business carries and what returns shareholders receive on the enormous capital deployed.

This could make the period between the Nigerian IPO and the proposed US listing particularly important. If the refinery reaches 1.4 million bpd while demonstrating sustained revenue growth, strong margins and healthy cash generation, the US flotation could provide a mechanism for expanding its investor base and potentially supporting a higher valuation.

If capacity expansion instead produces weaker-than-expected returns, the same US market could expose the gap between the company’s ambitious growth narrative and its financial performance.

The proposed US listing therefore creates two opposing possibilities for investors entering Dangote Refinery through the Nigerian IPO.

Operational expansion, higher earnings and international visibility could persuade global investors to value the refinery more highly, creating an opportunity for the Nigerian-listed shares to benefit from expectations surrounding the eventual international listing.

The other is a valuation correction in which US investors could apply stricter global-sector benchmarks and conclude that the refinery’s existing valuation already discounts much of its expected growth. In that scenario, the international listing could expose rather than eliminate valuation pressure.

From a financing prism, Dangote’s statement that the company could list in the US in three or four years consequently makes the Nigerian IPO more than a fundraising exercise. It sets a future benchmark against which the refinery’s Nigerian-market valuation may ultimately be measured.

The critical issue will be whether the company can convert its extraordinary physical scale into equally strong and sustainable financial returns before it reaches the US market.

For Nigerian shareholders, the planned US listing of Dangote Refinery would either boost or dilute the prevailing IPO share value.