Dangote Industries Limited (DIL) is facing mounting financial pressure as its total debt burden soars beyond ₦14 trillion, reflecting a 118% increase from the ₦6.4 trillion recorded in 2023. This sharp rise in debt surpasses market expectations, which initially projected a more moderate figure of ₦5.4 trillion.
Thank you for reading this post, don't forget to subscribe!Refinery Woes Driving Debt Surge
A significant portion of Dangote’s rising debt is attributed to the Dangote Petroleum Refinery, a $20 billion project located in Lekki, Lagos. Originally budgeted at a lower cost, the refinery has experienced severe cost overruns and delays, now nearly a decade behind schedule. These financial pressures have strained the company’s cash flow, forcing DIL to explore various financing options to keep operations afloat.
Dangote Cement Steps In to Rescue Parent Company
In a move to mitigate its financial distress, Dangote Cement, a major subsidiary of DIL, secured a $675 million loan from Afreximbank. The loan was intended to support its parent company as well as sustain operations at the refinery. However, despite this intervention, the company’s earnings before interest, tax, depreciation, and amortization (EBITDA) margins have plummeted below 10%, a steep decline from the five-year average of 33.7%.
Credit Downgrade Sparks Controversy
The worsening financial situation led Fitch Ratings to downgrade Dangote Industries’ National Long-Term Rating from ‘AA(nga)’ to ‘B+(nga)’ in August 2024. The rating agency cited high leverage, underperformance of key assets, and weak cash flow as major concerns. Following the downgrade, Dangote Industries terminated its engagement with Fitch, claiming the withdrawal of the rating was done at its request.
Still Nigeria’s Largest Taxpayer
Despite these financial challenges, Dangote Industries remains Nigeria’s highest taxpayer, contributing over ₦402.3 billion in taxes in 2024. The company maintains that it is taking necessary steps to address its liquidity challenges and ensure long-term stability.
With increasing pressure to deliver on its refinery project and stabilize its financial outlook, all eyes remain on Africa’s richest man, Aliko Dangote, as he navigates these turbulent economic waters.
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