Aliko Dangote’s sugar firm raises $28.8 million via commercial paper

Feyisayo Ajayi -

Key Points:

  • Dangote Sugar successfully issued $28.83 million via commercial paper (CP) issuance to navigate high borrowing costs in Nigeria.
  • Dangote Sugar offers attractive rates (up to 21.3 percent) to compete with rising bank interests exceeding 40 percent.
  • Despite challenges, Dangote Sugar aims to leverage the funds raised from the Notes to meet its operational and growth objectives.

Dangote Sugar Refinery, a key player in Nigeria’s sugar industry and majority-owned by Africa’s richest man Aliko Dangote, has successfully raised N42.79 billion ($28.8 million) through its series 4 and 5 Commercial Paper (CP) issuance. This strategic move comes as the company navigates a challenging borrowing environment in Nigeria.

The issuance, part of Dangote Sugar’s N150 billion ($101.07 million) CP program, consists of two tranches designed to improve financial flexibility. Series 4, totaling N12.93 billion ($8.72 million), offers a 181-day term at a discounted rate of 23%. Series 5 amounts to N29.86 billion ($20.13 million) with a 265-day term at 25%. The offering attracted a diverse investor base, including Pension and Non-Pension Asset Managers, institutional investors, and individuals.

In a recent press release, Dangote Sugar Refinery emphasized the significance of the issuance in achieving the company’s financial objectives, saying: “The successful issuance of the Notes demonstrates investor confidence in our operations and financial strategy,” Hassan stated. “We are committed to utilizing these funds efficiently to support our working capital and drive growth.”

Dangote Sugar strengthens financial backing

Proceeds from the CP issuance will bolster Dangote Sugar’s short-term working capital and funding requirements, reinforcing its ability to meet operational needs and pursue strategic initiatives. The move underscores the company’s proactive approach in leveraging the fixed-income market to secure more cost-effective financing amidst Nigeria’s high borrowing costs, which can exceed 40 percent.

Despite challenges such as currency fluctuations and inflation impacting Nigerian manufacturers, Dangote Sugar’s CP offerings provide a viable alternative to traditional bank loans, offering rates significantly lower than prevailing market averages.

Since its February 9, 2024, admission to the FMDQ, Dangote Sugar has successfully raised N99.01 billion ($68.87 million) through series 1, 2, and 3 CP issuances. This includes N39.39 billion ($26.56 million) in Series 1, N6.15 billion ($4.15 million) in Series 2, and N53.47 billion ($36.05 million) in Series 3, reflecting strong investor interest in the company’s financial instruments.

Dangote Sugar revenue grows despite currency headwinds

Dangote Sugar Refinery saw its revenue surge to $88.17 million in the first quarter of 2024, but posted a first-quarter loss of $49.6 million attributed to naira devaluation. Looking ahead, the company plans to deploy funds raised from the Notes to sustain operational excellence and drive further growth in the competitive Nigerian market.

Aliko Dangote, with a net worth of $15 billion according to the Bloomberg Billionaire Index, retains a commanding 72.7-percent stake in Dangote Sugar, underscoring his commitment to the company’s strategic expansion and sustainability goals.