Founder and the Chief Executive Officer of Dangote Industries Limited, Aliko Dangote, has revealed the heavy loan cost his company took to finance the development of its Obanaja Cement plant in Kogi State which attracted a 40 percent interest rate from local banks.
The plant, which is now Dangote Cement’s flagship facility, was budgeted at 1bn, but has suffered delays caused by infrastructure deficiencies and other operational difficulties.
The Founder shared his experience on Thursday at the 25th annual conference of Women in Management and Business in Lagos, while urging women entrepreneurs to pursue industrial businesses and ambitious investment plans using the Obajana story as an example.
He recalled that the company undertook the $180m project when banks operated with Just N25bn capital, noting that the company did not invest in key infrastructures such as gas pipelines, fuel facilities and power plants as the government announced to supply adequate public utilities.
“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.
Dangote said the company approached the International Finance Corporation, IFC, in order to ease the financial challenges but the IFC turned down the company’s proposed three-year repayment plan after reviewing its financial projections and instead offered a longer repayment arrangement.
“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.
He stressed that upon the longer payment period, the company was paying combined rate of 40 percent to local banks, adding that it can be confirmed through records.
Dangote disclosed that six months before the expiration of the 18-month financing arrangement, he invited the bankers for dinner and paid them in full.
“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.
Today, Obajana is Dangote Cement’s largest Nigerian factory, producing 16.25 million tonnes per annum across five production lines.
Obajana was commissioned in 2007, with two lines producing a combined capacity of five million tonnes per annum and the third line added in 2012 increased to 10.25m tonnes per annum.
Capacity was further expanded with two production lines of three million tonnes per annum, added in late 2014 and 2020.