November 29, 2012 ventures-africa Entrepreneurs
VENTURES AFRICA/Africa’s Secret Millionaires – Move over, Oprah – there is a new richest black woman in the world. And she’s Nigerian.
Meet Folorunsho Alakija, a Nigerian billionaire oil tycoon, Fashion designer and philanthropist who is worth at least $3.3 billion- contrary to a recent Forbes Magazine ranking which pegs her net worth at only $600 million.
Alakija, 61, was born into a wealthy, polygamous Nigerian family. She started out her professional career in the mid 70s as a secretary at the now defunct International Merchant Bank of Nigeria, one of the country’s earliest investment banks. In the early 80s, Alakija quit her job and went on to study Fashion design in England, returning to Nigeria shortly afterwards to start Supreme Stitches, a premium Nigerian fashion label which catered exclusively to upscale clientele.
The business thrived, and Alakija quickly made a tidy fortune selling high-end Nigerian clothing to fashionable wives of military bigwigs and society women.
Folorunsho Alakija – Oil Prospecting License
In May 1993 Alakija applied for an allocation of an Oil Prospecting License (OPL). The license to explore for oil on a 617,000 acre block – (now referred to as OPL 216) was granted to Alakija’s company, Famfa Limited. The block is located approximately 220 miles South East of Lagos and 70 miles offshore Nigeria in the central Niger Delta.
This was in 1993. Many wealthy Nigerian businessmen and military bigwigs who had been allocated oil blocs by the military administration at the time had no clue as to the technicalities in operating an oil block, so many of them typically acquired OPLs, and then flipped them off to international oil companies for substantial profits.
But Alakija was intelligent. She had no expertise or experience in running an oil field, but she decided not to sell off her license. In September 1996, she entered into a joint venture agreement with Star Deep Water Petroleum Limited (a wholly-owned subsidiary of Texaco) and appointed the company as a technical adviser for the exploration of the license, transferring 40 percent of her 100 percent stake to Star Deep. Subsequently, Star Deep sold off 8 percent of its stake in OPL 216 to Petrobas, a Brazilian company. Folorunsho Alakija and her family owned 60 percent.
Folorunsho Alakija and the Nigerian Government
Star Deep Petroleum carried on with exploitation of the oil field. In 2000, the first appraisal well was confirmed to have recoverable reserves in excess of 1 billion barrels of oil equivalent. When this was discovered, the Nigerian government, led by Olusegun Obasanjo immediately ordered that a 40 percent interest in OPL 216 be allocated to the Nigerian National Petroleum Corporation (NNPC) under the Back-in-Right Regulation of 2003 which gives the Nigerian government participatory rights in any OPL or OML. You can read more about this back-in-right regulation in detail here.
This would leave Famfa Oil with a 20 percent stake. This was in 2000, and the government did not pay Famfa a dime for the stake. In 2003, Famfa applied for a conversion from an OPL to an OML, and in 2004 the request was granted. OPL 216 became OML 127.
But the Nigerian government was not content with its 40 percent stake in Famfa. In 2005, the government led by General Olusegun Obasanjo forcefully acquired a further 10 percent stake in OML 127.
Folorunsho Alakija immediately went to the courts to challenge the government’s forceful acquisition take a 50 percent in the license. It was a lengthy court battle which lasted for several years, but in May 2012, the Supreme Court voided the government’s acquisition of a 50 percent stake in OML 127 and subsequently transferred the 50 percent stake back to Famfa Oil. (Read about Famfa’s victory here).
The Nigerian government tried to appeal the Supreme’s court decision, but the case