By Chibuzor Alli
Africa’s richest industrialist, Aliko Dangote, has revealed that his company paid interest rates as high as 40 per cent to Nigerian banks while financing the construction of its Obajana Cement plant in Kogi State, highlighting the high cost of borrowing that confronted local industrial investors.
Dangote disclosed that the project, initially estimated to cost $180m, eventually ballooned to $1bn following infrastructure shortages, operational difficulties and additional financing requirements.
The Founder and President/Chief Executive of Dangote Industries Limited made the revelation on Thursday at the 25th annual conference of Women in Management and Business (WIMBIZ) in Lagos, where he encouraged women entrepreneurs to pursue ambitious industrial investments despite the challenges of doing business in Nigeria.
Recalling the financial pressure involved in establishing the cement factory, which has since become Dangote Cement’s flagship facility, he said the company had to rely on local banks when their capital base was still relatively small.
“You won’t believe how much interest we were paying when we built Obajana (Kogi State, Nigeria). I tell you, we were able to do it when the banks were at N25bn capital. And we took on a project of $180m,” Dangote said.
According to him, the company initially underestimated the infrastructure required to operate the factory because it expected the government to provide essential public utilities, including electricity and gas infrastructure.
However, those expectations did not materialise as anticipated, forcing the company to make additional investments in facilities it had not originally planned to build.
“So we ended up having a problem. We didn’t put in a gas pipeline, we didn’t put fuel in, we didn’t put in a power plant. All these things, because the government announced that we’d be having enough power, we’d be having enough this and that,” he said.
The infrastructure challenges contributed to the sharp increase in the project’s overall cost, prompting Dangote Industries to approach the International Finance Corporation (IFC) for additional financing.
Dangote explained that the company initially proposed repaying the IFC loan within three years, but the international financing institution rejected the repayment structure after reviewing its financial projections.
Instead, the IFC recommended a seven-year arrangement, including an initial two-year period without repayments and a subsequent five-year repayment window.
“We wanted to pay within three years, but when the IFC used their own financial model, they said our business plan was wrong. They gave us seven years. They said in the first two years we cannot pay anything. Then, in five years, is the payment period,” he said.
Despite the longer repayment arrangement, financing from Nigerian banks remained particularly expensive.
Dangote disclosed that the company was paying interest rates of up to 40 per cent to some local lenders, although he declined to identify the banks involved.
“But because our interest rates were high, we were paying combined. Also, I don’t want to mention the name. But we were paying interest at 40 per cent to the local banks. They can check the records,” he said.
He added that the company eventually settled the outstanding loans ahead of the agreed financing deadline.
According to him, he invited the bankers to dinner six months before the expiration of the 18-month financing arrangement and presented them with cheques to clear the obligations.
“On the 18th month, six months before the expiry, I invited the bankers to dinner, and at the end of the dinner, I gave everybody their cheque. I paid off,” he said.
Obajana grows into a 16.25-million-tonne cement giant
The Obajana plant has since developed into Dangote Cement’s largest Nigerian manufacturing facility, with an installed production capacity of 16.25 million tonnes per annum across five production lines.
Commissioned in 2007, the factory initially operated two production lines with a combined capacity of five million tonnes annually.
Its capacity increased to 10.25 million tonnes per annum in 2012 following the addition of a third production line.
Two additional lines, each with a capacity of three million tonnes annually, were subsequently introduced in late 2014 and 2020.
Dangote says refinery scepticism did not stop $20bn project
Beyond the cement business, the industrialist also recounted the difficulties involved in developing the Dangote Petroleum Refinery, saying several international engineering companies and industry players initially doubted the feasibility of the project.
He explained that the original plan was to construct a refinery with a capacity of 300,000 barrels per day before the target was increased to 650,000 barrels per day.
According to him, some international engineering, procurement and construction (EPC) contractors declined to participate because they considered Nigeria too risky for a project of that scale.
The company eventually decided to take responsibility for the engineering, procurement and construction work itself.
Dangote said the refinery not only achieved its original 650,000-barrel-per-day design capacity but had also exceeded that figure.
“We’re able not only to deliver the 650,000, which they say will not be done. We now are at 710,000 barrels,” he said.
He further disclosed that the refinery was expected to achieve the highest profitability on the African continent within 55 days, describing profitability as the company’s immediate priority.
Dangote urges women to pursue ambitious investments
At the WIMBIZ conference, Dangote challenged women entrepreneurs to think beyond conventional business opportunities and set ambitious targets, particularly in sectors such as manufacturing and industrial production.
He urged them not to allow doubts from others to discourage them from pursuing large-scale business ventures.
“Don’t let anybody tell you that you are not able to do it. You must think very, very big. You must be very ambitious. You must give yourself a target and believe that you can deliver that target,” he said.
He also identified inadequate infrastructure as one of the major obstacles confronting businesses in Nigeria, noting that companies frequently have to provide facilities that would ordinarily be expected from the government.
“We are facing a lot of issues in terms of infrastructure. And right now, sometimes, what we do is we put the money down. I would like to build this infrastructure, and then we just do it on our own,” he said.
The industrialist urged business leaders to remain persistent despite the difficulties associated with entrepreneurship and large-scale investments.
“There is nothing in life that is easy. So you must say that yes, it’s difficult for me, but I can surmount all these pressures,” he said.
Earlier, Founding Chairperson and Trustee of WIMBIZ, Omobola Johnson, reflected on the organisation’s 25-year journey and its efforts to establish a sustainable platform for women in business and management.
Johnson said the organisation had survived and grown through inclusion, mutual respect, shared leadership and effective succession planning.
She also challenged the perception that women could not work together, pointing to WIMBIZ’s continued existence and development over the past 25 years.
“We countered the fallacy that women cannot work together. We have worked together for 25 years, and we have built an institution that has endured, stood the test of time,” Johnson said.
She added that the organisation’s founders prioritised their collective vision over personal interests and ethnic differences, maintaining a commitment to diversity and shared purpose.
Leave a comment