Africa's richest man targets 10 million investors for his refinery IPO

Aliko Dangote is trying to sell shares in his oil refinery to 10 million people, in a country where only about 2.7 million people actively invest in stocks.

The target is the centerpiece of a marketing campaign for the initial public offering of Dangote Petroleum Refinery and Petrochemicals, which seeks to raise $1.6 billion, mostly from retail investors across Africa. It is the largest IPO in African history, and Bloomberg estimates that it values the refinery at about $49 billion, less than three years after the plant began operating. The subscription period closes on Oct. 13.

Nigeria, Africa's most populous country, has 243 million residents and about 2.7 million active investors, according to Jude Chiemeka, chief executive officer of the Nigerian Exchange. If Dangote hits his target, the refinery alone would have close to four times as many shareholders as the entire Nigerian market has active investors today.

Dangote is selling the deal as an "IPO for the people." Shares are priced at 525 naira, and the minimum purchase of 10 shares costs about $4. "With a minimum subscription of just 10 shares, the offer is designed to give ordinary Nigerians and Africans an opportunity to own a stake in the refinery," Dangote said when the offer launched. He has described it as a chance for workers, entrepreneurs and ordinary Nigerians to share in the refinery's growth rather than only as a way to raise capital.

Demand strains the platforms

Early interest has tested the systems handling the sale. Bamboo, one of Nigeria's largest digital investment platforms, went down after traffic surged to 10 times its usual level within 30 minutes of the offer opening on Sept. 14, co-founder and Chief Operating Officer Yanmo Omorogbe told Reuters. Other platforms handling the IPO were also strained.

The offer can be enlarged if demand is strong enough, which would lift the total raised to as much as $2.1 billion.

The money is meant to fund a $14 billion plan to double the refinery's capacity from nearly 700,000 barrels a day to 1.4 million barrels a day by the first quarter of 2029. That would make it one of the largest refineries in the world. The group is also targeting $36 billion in revenue this year.

The biggest winner may be Dangote

Dangote will still control more than 80% of the refinery after the listing. Bloomberg has calculated that the IPO could lift his net worth by 64%, to as much as $58.6 billion, by putting a market value on a business he has built almost entirely on his own.

The refinery is the first step in a wider plan to take his businesses to public investors across Africa. Dangote said this week that he is bringing forward the listing of his fertilizer company to next year. He has also pledged to list the $16 billion East African refinery he broke ground on in Kenya on Wednesday on the Nairobi Securities Exchange, and Botswana is exploring a way for its investors to buy into the Nigerian refinery through depositary receipts on the Gaborone exchange.

There are risks for first-time buyers. The shares on offer make up only a small slice of the company, which could limit trading once the stock lists, and the IPO is priced higher than a private placement the refinery completed in July.

A register of millions of small shareholders would also give Dangote a broad base of public support at a time when the refinery sits at the center of Nigerian politics. The plant now supplies most of the country's petrol, and Dangote has faced accusations that it has too much control over the fuel market, a charge he rejects.