Dangote Cement: Forex situation tight in Nigeria – looking to external operations

Dangote Group, Nigeria’s largest company, is struggling with a constricted supply of foreign-exchange in the West African country and is relying on its international cement operations and export-credit agencies to get around the shortage.

“The forex situation is extremely tight in Nigeria,” Executive Director Devakumar Edwin said in an e-mailed response to questions on Wednesday. “But Dangote Cement is already generating income in foreign exchange in Ethiopia, South Africa, Tanzania, Senegal and Cameroon. Further, we are also making financing arrangements through export-credit agencies for the first time.”

Nigeria’s central bank has pegged the naira at 197-199 per dollar since March 2015 to stem its slide amid a global decline in oil prices. The policy has led to a shortage of foreign-exchange and been widely criticized by investors and businesses, who blame the restrictions for exacerbating the country’s economic slump. Growth was 3 percent last year, the slowest pace since 1999, according to the International Monetary Fund (IMF).

Nepal Expansion

Dangote Cement Plc., a subsidiary of the Dangote Group, is seeking to increase sales and protect market share at its cement unit in Nigeria amid weaker demand, while expanding elsewhere in sub-Saharan Africa and Asia. The company will build two new plants in Nigeria within 3 years that will add 9 million metric tons annually, increasing total capacity to 38 million tons.

Dangote Cement has also received all regulatory approvals to start building a 3 million-ton capacity plant in Nepal, Edwin said. “We are checking the impact of the altitude on the capacity,” he said. “Ethiopia is a 3 million-ton per annum plant but can deliver only 2.5 million tons due to the altitude. It is the only plant outside Africa which has been announced by us.”

The company is on track to commissioning a cement plant in the Republic of Congo and an import terminal in Sierra Leone this year.

Dangote Cement’s shares have fallen 21 percent to 134 naira (US$0.67) this year, compared with the 16 percent decline of the Nigerian Stock Exchange All Share Index.

Source: Bloomberg Business