Nigeria’s state-run oil company, the Nigerian National Petroleum Corp., signed a memorandum of understanding in June with the China State Construction Engineering Corp. Ltd. to create three oil refineries and a petrochemical plant. Each refinery in the $23.8-billion deal would have a production capacity of 250,000 barrels per day, according to Xinhua, China’s official news agency.

A consortium of Chinese banks, including China’s Export and Credit Insurance Corp. and China’s Export-Import Bank, is expected to provide funding. The loans would be repaid from the refinery production stream, with the Chinese managing the refineries until loans are repaid. Despite being the world’s 12th-largest oil producer and the eighth-largest oil exporter, Nigeria imports nearly 85% of its fuel needs due to the crumbling state of its four state-owned refineries.

A time frame has yet to be outlined, and though a feasibility study now is expected, observers are skeptical about the project’s likelihood of success. Deborah Brautigam, author of “The Dragon’s Gift,” a book about Chinese aid and economic engagement in Africa, foresees chances of the project being derailed as “quite high.” She explains, “It’s an enormous sum. Nigeria is politically unstable. An election is looming.”

The three refineries will be built in the states of Bayelsa, Kogi and Lagos, while a location for the petrochemical complex has yet to be confirmed. “Keep in mind that only 2% to 4% of MOUs [memos of understanding] lead to projects in Africa,” urges Remi Bello, founder and CEO of B&M Consulting, a political-risk consultancy focused on Africa.