…as Dangote’s Refinery Budget vs. Mag 7 shows Massive AI Opportunity Cost
What if Africa’s richest man Aliko Dangote had invested the $22 billion used to finance his 650,000 barrels per day (bpd) refinery and Fertilizer plant into a basket of Artificial Intelligence (AI) stocks abroad instead of betting on Nigeria?
The results would show a massive opportunity cost of building the refinery in Nigeria and a cautionary tale for all future potential investors, unless the government reins in those sabotaging Dangote’s huge Refinery investment
The Magnificent 7 stocks—Apple, Microsoft, Amazon, Alphabet (Google), Meta (Facebook), Nvidia, and Tesla—have had an extraordinary performance from 2014 to 2024.
Key Performance Highlights:
- The combined market value of these stocks soared from around $1.8 trillion in 2014 to roughly $18 trillion by 2024, a nearly 10x increase in market capitalization over the decade.
- The average annual return for these stocks was approximately 25% per year over the 10-year period, including price appreciation and dividends.
Investment Scenario:
If Aliko Dangote had invested $2 billion every year from 2014 through 2024 (11 years total, totaling $22 billion) equally into these stocks at the end of each year, his investment would have grown substantially.
Using the 25% average annual return approximation:
- The earliest $2 billion invested in 2014 would have grown for 10 full years by 2024,
- Summing the future values of each year’s $2 billion at 25% growth would total roughly around $60 billion to $65 billion by 2024 (when the Refinery kicked off production).
Key points
Instead of investing $22 billion in the Dangote Refinery and Fertilizer plant outright, investing $2 billion annually over 11 years in the Magnificent 7 stocks could potentially have grown to over $60 billion by 2024 due to their exceptional growth (about 3x the initial amount).
This highlights the massive outperformance of these leading tech/innovation stocks over the past decade.
The Magnificent 7 stocks (Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, Tesla) have averaged about a 25% annualized return from 2014 to 2024, roughly producing a 10x increase in value over the decade.
If Aliko Dangote had invested $2 billion each year (gotten from Dangote Cement and other dividends from firms he controls, as well as savings and cash holdings) from 2014 through 2024 (11 years total, $22 billion) evenly in these stocks, applying a 25% return per year, the investment would approximate to about $60 billion or more by 2024.
Dangote is worth $29bn today according to the Bloomberg Billionaires Index, which values his refinery on the amount it cost to build it.
Dangote also owns a $2 billion fertilizer plant with capacity to produce up to 2.8 million tonnes of urea annually.
This means the $22 billion used for Dangote Refinery and Fertilizer plant, had it been invested annually in the Magnificent 7 instead, would potentially be worth around $60 billion by 2024—about three times the original capital, showing a $40 billion opportunity cost.
This illustrates the extraordinary growth of the Magnificent 7 stocks over the last decade as well as Dangote’s massive opportunity cost.
Of course hindsight is 50:50 and the Refinery could still pay off massively, however all he has now is headaches and Nigeria oil Union’s seeking to disrupt his investment.
The unhealthy business environment in Nigeria as well as the relative ease of investing in financial assets as opposed to difficulties in building out a manufacturing sector is something facing all Emerging Markets (EM).
However, Dangote’s troubles should be a wake-up call to the Nigerian government to improve the nation’s business environment and rein in disruptive elements like PENGASSAN Oil Unions if they want to attract foreign direct investments (FDI).
Dangote Oil Refinery Subject to Repeated Sabotage
Nigeria’s giant Dangote oil refinery has been subject to “repeated acts of sabotage,” according to a recent statement by the Dangote Refinery.
The start of the Dangote refinery last year turned Nigeria into a net exporter of petroleum products. Previously, the country’s reliance on costly imports boosted demand for foreign exchange and put pressure on the local currency, the naira.
Since it began operations, the plant has transformed oil markets in West Africa and beyond, buying large volumes crude oil from the region.
In recent weeks it sent its first cargoes of gasoline to the US.
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PEGASSAN) however on Saturday directed its members in exploration companies including TotalEnergies E&P, Seplat Producing Nigeria Unlimited and Chevron to shut crude supply valves and gas supply to the refinery.
We are “drawing the attention of the Federal Government and its security and law enforcement agencies — to this criminal, lawless, reckless and irresponsible conduct,” Dangote Petroleum Refinery said in a statement.
“The association’s directive amounts to economic sabotage.”
Products that would be disrupted include aviation fuel, petrol, diesel, kerosene and cooking gas, it added.
Follow the MoneyCentral Nigeria channel on WhatsApp: Click here!
