ALIKO DANGOTE FACING FINANCIAL DIFFICULTIES
Chukwudi Iwuchukwu
While the whole country is waiting with bated breath for Africa’s richest man, Aliko Dangote, to finish the crown of his jewel, “Dangote Refinery”, the financier of the project and the owner is In a big quandary as Nigeria’s richest man does not have the money nor the financial capacity to deliver the project to completion next year as scheduled.
Aliko Dangote is broke at the moment as our man had invested all he had on the project and even borrowed money from financiers to add to what he had.
This bombshell was released by Fitch, the world’s biggest global rating agency.
Let’s hear from Fitch as they take it up from here.
Dangote Industries has limited financial flexibility with which to complete its refinery and
petrochemical plant.
The timely completion of the project “is a key driver” of Fitch’s assessment, and “only limited delays or cost overruns may be tolerated in the current rating.”
Fitch argues that Dangote Industries suffers from weak corporate governance.
Fitch says the existence of a “complex group structure with a large number of related-party transactions” has “a negative effect on operational and financial transparency.”
“We also think it’s a risk that Aliko Dangote, as CEO and main shareholder, has a lot of power over operations.”
The timetable for commissioning the refinery has been consistently slipping. Aliko Dangote said in April that he expects commissioning before the end of Muhammadu Buhari’s term as president next year. Fitch says the refinery is likely to contribute around $1b to EBITDA annually when ramped up from 2024.
Let me digress from the Fitch report.
Aliko Dangote promised his friend, President Buhari, that he would commission the $19 billion refinery project before the president retires to Duara next year.
Not only is the Dangote refinery very dear to this government as they see the project as the messiah that will solve Nigeria’s perennial fuel scarcity problem as it will end our dependence on imported foreign fuel, but the good people at Fitch are saying that this dream and the time line Dangote gave Buhari is not achievable.
And their reason is not far fetched: Dangote requires an additional $1.1 billion (900 billion) naira to complete the refinery next year.
Unfortunately, Dangote does not have that kind of money now as he has invested all his cash and even borrowed from lenders to finance the refinery project.
Again, the lenders that borrowed Dangote’s loan for the financing of the project cannot give him the 900 billion naira that Dangote needs to complete the project as they are already over exposed to the project.
So the only way Dangote can raise money is through the sale of bonds by his cement company, Dangote Cement.
Dangote cement is already billed to sell bonds this year.
If the money urgently needed by Dangote isn’t raised through the sale of bonds, he can sell some shares in his cement company (he owns over 86% of Dangote cement) or he can sell some refinery project stakes, which would be likely options to plug the gap.
He has sold 20% of the refinery stake to NNPC at a cost of $2.5 billion, but he might be forced to dilute more stakes in the refinery if all the options to raise the $1.1 billion needed to complete the refinery fail him.
But if all these measures to raise money fail to see the light of the day, the only available card left for Aliko is to increase the price of his cement from what it is now to something higher.
In case you hear that the price of Dangote cement has gone up this year, just know that Aliko is cash strapped as he is looking to raise money by all legal means possible.
Back to Fitch now, Fitch concluded its report by saying that the earliest Dangote refinery can deliver its project is 2024 and not the 2023 that Dangote promised his friend, Buhari, the global rating agency concluded.
The Dangote refinery project has gone too far and our man, Aliko Dangote, is racing against time just to make sure that he delivers the project. If not for anything, a lot of hopes and dreams are tied to the project, and its failure to deliver will be nothing but a catastrophe.
Being a big man is not easy, especially when you need money urgently like this and the channel to raise it is limited.
Regardless, I’m rooting for Aliko Dangote to deliver the project. If for nothing else, delivering the $19 billion Dangote refinery project will be a symbol of aspirations and motivation for the younger generation of entrepreneurs and most importantly, it will serve as a catalyst and the poster child that dreams come true in Nigeria.
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