Africa’s richest man Aliko Dangote to divest 12.5-percent stake in refinery

Timilehin Adejumobi -

Key Points

  • Dangote Industries, led by Africa’s richest man Aliko Dangote, is considering selling a 12.5% stake in its refinery due to liquidity issues.
  • The refinery’s diesel exceeds environmental standards, raising concerns despite a $20-billion investment.
  • Fitch Ratings downgraded Dangote’s credit ratings, citing liquidity challenges and potential financial restructuring.

Dangote Industries Limited, the diversified manufacturing conglomerate led by Africa’s richest man Aliko Dangote, is contemplating selling a 12.5-percent stake in its refinery, according to Fitch Ratings. This potential divestment is driven by the company’s current liquidity challenges.

The move follows growing scrutiny over the high sulphur content in diesel produced by the refinery, despite a $20-billion investment. Reports indicate that the diesel’s sulphur levels exceed environmental standards, raising concerns among stakeholders.

Debt repayment and financial restructuring concerns

In 2021, Nigerian National Petroleum Corporation (NNPC) acquired a 7.25-percent stake in the Dangote refinery for $1 billion, with an option to buy an additional 12.75 percent by June 2024. Dangote plans to sell this stake to repay a major loan due in August.

Fitch Ratings has raised concerns about the sale and debt repayment timing, warning of potential financial restructuring or credit downgrades if delays continue. The refinery, running at 50-percent capacity in early 2024, processes 325,000 to 375,000 barrels per day. Gas supply issues are also affecting Dangote’s fertilizer operations and refinery EBITDA. Fitch expects gradual EBITDA growth starting in Q3 with higher gasoline production.

As of late 2023, Dangote Group’s senior secured debt totals $2.7 billion, or 49 percent of total debt, including $2.3 billion in subordinated loans. The company has secured N350 billion in senior unsecured debt for capital projects, maturing in 2029 and 2032.

Two months ago, Aliko Dangote announced he had repaid $2.4 billion of a $5.5-billion loan for the $19-billion Lagos-based refinery. Despite project delays and rising costs, Dangote noted significant progress, with $2.7 billion left to repay.

Fitch downgrades Dangote’s credit ratings

Located near Lagos, the Dangote Petrochemical Complex is a major milestone in Nigerian industrial development, featuring a one-million-metric-tonne-per-year polypropylene plant and two large fertilizer trains with a combined annual capacity of three million tonnes of urea.

Last month, Dangote expressed willingness to sell the refinery to the state-owned NNPC amidst regulatory issues and a dispute with a key equity partner. President Bola Tinubu’s directive to supply crude oil to the refinery in Naira aims to stabilize fuel prices and the dollar-naira exchange rate.

Fitch recently downgraded Dangote Industries’ credit ratings, citing significant liquidity concerns and challenges in raising funds, placing the company’s ratings on negative watch.