Head of Financial Institutions Analysis at Renaissance Capital Africa, Olumide Sole, has said fundamental market variables are key to determining the valuation of Dangote Refinery.
Speaking during an interview with ARISE News on Wednesday, Sole said the refinery’s refining margins, expansion plans and future cash flows were among the key factors considered in Renaissance Capital’s valuation assessment.
He said Dangote Refinery enjoys higher refining margins than European refineries, making margins an important component of its valuation.
“So those kinds of, these kinds of variables, fundamental variables, definitely drive the valuation of the refinery.”
Sole said Renaissance Capital expects Dangote Refinery’s gross refining margin to rise to $27.50 for full-year 2026, compared with $24 recorded in the first half of the year.
“For full year 2026, we are looking at 27.5. So for Q3, we think will be higher gross refining margins.”
However, he said the firm does not expect the current elevated refining margins to persist indefinitely.
“We obviously, we don’t think that this would continue forever.”
Sole said Renaissance Capital had therefore normalised its gross refining margin assumptions for 2027 through 2030 to account for the possibility of changing market conditions.
“Renaissance Capital had therefore normalised its gross refining margin assumptions for 2027 through 2030 to reflect the possibility of changing market conditions.”
He also identified the timing of Dangote Refinery’s planned expansion as another factor that could influence the company’s valuation.
“The timing of Dangote Refinery’s planned expansion is another factor that could influence its valuation.”
The refinery is expected to expand its capacity from 700,000 barrels per day to 1.4 million barrels per day. Sole said management expects the expansion to be completed by December 2028, while Renaissance Capital’s base-case assumption is 2030.
“Our base case is 2030.”
According to Sole, Renaissance Capital also considered scenarios in which the expansion could be completed in 2028 or 2031, with the timing affecting when additional cash flows would begin to accrue.
“Cash flows, earlier cash flows tend to actually boost valuation compared to later cash flows.”
Sole said the assessment underscores the importance of the refinery’s underlying fundamentals in determining its valuation.
“Fundamentals actually matters.”
Goodness Anunobi
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