Nigerian billionaire Aliko Dangote is planning a multitrillion-shilling investment in Kenya that could transform the country’s petroleum industry and position Lamu as a major energy hub for East Africa.
Dangote plans to invest about Sh2.07 trillion ($16 billion) to build a proposed oil refinery in Lamu, with construction expected to begin by October 2026 and completion targeted within four years.
The project would be financed through a combination of debt and equity, with Dangote planning to borrow about Sh1.45 trillion ($11.2 billion), equivalent to 70 per cent of the total project cost. The remaining 30 per cent would come from equity.
The proposed refinery would have a processing capacity of 700,000 barrels of crude oil per day, making it larger than Dangote’s existing refinery in Lagos and potentially the biggest refinery in East Africa.
But what exactly is Dangote planning, how will the project be financed, and what would it mean for Kenya?
How much will the Lamu refinery cost?
Dangote has placed the estimated cost of the project at approximately $16 billion, or about Sh2.07 trillion.
The figure is slightly lower than his earlier estimate of $17 billion. Dangote said the revision followed assessments showing that the refinery could be completed within four years.
Proposed financing structure
| Financing source | Share | Approximate amount |
|---|---|---|
| Debt | 70% | Sh1.45 trillion ($11.2 billion) |
| Equity | 30% | Sh622 billion ($4.8 billion) |
| Total project cost | 100% | Sh2.07 trillion ($16 billion) |
This means most of the money used to construct the refinery would come from borrowing rather than direct equity investment.
The size of the debt component will therefore be an important factor in determining the project’s financial sustainability once operations begin.
How big will the refinery be?
The Lamu refinery is being designed to process 700,000 barrels of crude oil every day.
That would give it a larger planned capacity than Dangote’s refinery in Lagos, which has a capacity of about 650,000 barrels per day.
| Refinery | Location | Capacity |
| Proposed Lamu refinery | Kenya | 700,000 barrels/day |
| Dangote refinery | Lagos, Nigeria | 650,000 barrels/day |
| Difference | — | 50,000 barrels/day |
At full capacity, the proposed Lamu plant would therefore be capable of processing about 50,000 more barrels of crude per day than the Lagos facility.
The scale is significant for Kenya, which currently relies heavily on imported petroleum products to meet domestic demand.
Where will the crude oil come from?
The refinery would require a substantial and reliable supply of crude oil.
One proposed source is Uganda’s oil fields, with crude transported through the East African Crude Oil Pipeline (EACOP).
The refinery could also source crude from Kenya’s oil deposits in Turkana as domestic production expands.
Imported crude arriving through the Port of Lamu could provide another source of feedstock.
The proposed supply model would therefore connect oil production in the region with processing and export infrastructure on Kenya’s coast.
Why does Dangote want to build the refinery in Lamu?
The location could give the project strategic access to both Kenyan and regional markets.
Lamu is positioned along the Indian Ocean and could serve as a gateway for petroleum products destined for markets across East and North Africa.
Dangote has indicated that the refinery could supply fuel beyond Kenya, potentially serving countries across the region and as far as Egypt.
If realised, the project could therefore turn Lamu into more than a port city by creating a major petroleum processing and distribution centre.
Why does Dangote want government protection?
One of the biggest issues surrounding the proposed refinery is competition from imported petroleum products.
Dangote has warned that the refinery would require government protection from what he considers unfair competition from cheaper fuel imports, particularly products originating from Russia and India.
He argued that no refinery could remain commercially viable if locally produced petroleum products were consistently undercut by cheaper imports.
This creates a difficult policy question for Kenya.
The government would have to balance protecting a major domestic investment against ensuring that consumers continue to have access to affordable fuel.
Excessive protection could push up fuel prices if local products become more expensive than imports, while insufficient protection could make it difficult for the refinery to compete.
Will the Kenyan government invest?
President William Ruto has indicated that Kenya could participate in the project through the National Infrastructure Fund, although the government has not disclosed the size of its proposed stake.
Government participation could help mobilise financing and strengthen Kenya’s involvement in a project expected to have regional economic implications.
However, the final investment structure, including the government’s financial contribution and the terms attached to it, will be critical in determining the public sector’s exposure to the project.
What could Kenya gain?
If successfully completed, the refinery could generate several economic benefits.
1. Reduced dependence on imported refined fuel
Kenya currently imports most of the petroleum products it consumes.
A large domestic refinery could allow some of the crude entering the country to be processed locally rather than importing finished petroleum products.
This could potentially reduce exposure to international refining and shipping costs.
2. New jobs and businesses
A project of this scale would require thousands of workers during construction and create additional employment once the refinery becomes operational.
It could also generate opportunities for transport companies, contractors, engineers, suppliers and other businesses linked to the petroleum industry.
3. More activity at Lamu Port
The refinery could significantly increase cargo volumes through Lamu Port.
Crude oil imports, equipment, petroleum products and other industrial cargo could create additional demand for port, logistics and transport services.
4. Regional fuel exports
Kenya could potentially become a major supplier of refined petroleum products to neighbouring countries.
The refinery’s proposed 700,000-barrel-per-day capacity would be far greater than Kenya’s domestic fuel requirements, meaning a substantial portion of production could be destined for regional and international markets.
What are the risks?
The size of the project also presents significant risks.
The first is financing.
Borrowing about Sh1.45 trillion means the project would carry a substantial debt burden. Its ability to repay that debt would depend on sustained refinery operations, crude supply, fuel prices and demand.
The second is competition.
International fuel markets are highly competitive. If imported petroleum products remain cheaper than fuel produced at Lamu, the refinery could struggle without government intervention.
The third is implementation.
A project costing $16 billion and requiring four years of construction would face risks involving financing, land, infrastructure, environmental approvals, crude supply and construction costs.
There is also the question of whether regional fuel demand will be large enough to absorb the refinery’s planned output.
What happens next?
Dangote says construction could begin by October 2026, with completion targeted within approximately four years.
For Kenya, the proposed refinery represents a potentially transformative investment in the country’s energy and industrial sectors.
But the project’s success will depend on more than its enormous price tag.
Kenya will need reliable crude supplies, supporting infrastructure, competitive operating costs and a clear government policy on imported petroleum products.
If those conditions are achieved, the Lamu refinery could turn Kenya into a major regional petroleum-processing hub.
If they are not, the country could face the difficult task of balancing consumer fuel prices with the protection of a multibillion-dollar investment.
For now, Dangote’s proposal remains one of the largest planned private-sector industrial investments ever associated with Kenya — and its progress will be closely watched across the region.
