Dangote’s Sh2 trillion Lamu refinery to be 70pc debt-funded

Construction of Aliko Dangote's planned oil refinery in Lamu, Kenya, will primarily hinge on debt financing, with approximately 70% of the Sh2 trillion project cost to be sourced from lenders, according to Business Daily. The remaining 30%, equivalent to about Sh621 billion, will be provided by shareholders, including Dangote himself.

The financing plan coincides with the project's progress toward construction, with Dangote recently announcing the groundbreaking event scheduled for October 2026. Dangote noted, "By October this year, we will be groundbreaking. Once we break the ground, we will begin the construction."

The project's revised cost has been adjusted downwards to approximately Sh2 trillion, down from an initial estimate of Sh2.2 trillion. The proposed refinery, to be constructed on Lamu Island, is set to boast a processing capacity of 700,000 barrels of crude oil per day. Upon completion and reaching full capacity, the facility would be the largest in East Africa and the second-largest on the entire African continent, following Dangote's refinery in Lagos, Nigeria.

Dangote unveiled plans to extend his refining business into East Africa with the Lamu facility, envisioning it to mirror his Nigerian refinery. The project is poised to address Kenya's demand for refined petroleum products and serve neighboring markets, including Uganda, Tanzania, South Sudan, and the Democratic Republic of Congo.

The refinery's output would generate petrol, diesel, and aviation fuel for Kenya and the surrounding region, potentially diminishing the reliance on imported refined petroleum products, which currently constitute a substantial portion of East Africa's petroleum supplies. Strategically situated along the Indian Ocean and with the potential to connect to the broader Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) Corridor, the refinery could bolster Lamu's standing as a regional energy and logistics hub.

This could generate prospects for local contractors, suppliers, transport companies, and other businesses during the construction phase and post-refinery operation. The debt-centric financing structure implies that lenders will assume a significant role in funding the development, while shareholders will contribute the remaining capital necessary to complete the project.