Dangote Industries Limited President and Chief Executive, Aliko Dangote, has revealed that his company paid interest rates of up to 40% on loans obtained from Nigerian banks to finance the construction of its Obajana Cement plant in Kogi State.
Dangote disclosed this on Thursday at the 25th annual conference of Women in Management and Business (WIMBIZ) in Lagos, where he recounted the financing difficulties and infrastructure challenges encountered while developing the facility, which has since become Dangote Cement’s flagship manufacturing plant.
According to the billionaire industrialist, the company embarked on the project when Nigerian banks had capital of about N25bn, initially committing $180m to the investment.
However, the project encountered significant cost overruns after the company failed to provide essential infrastructure internally, having expected the government to deliver adequate public utilities.
He explained that the company did not initially invest in gas pipelines, fuel facilities and independent power generation because of assurances that sufficient electricity and other infrastructure would be available.
The infrastructure deficiencies subsequently increased the project’s estimated cost to approximately $1bn, prompting Dangote Industries to seek additional financing from the International Finance Corporation (IFC).
Dangote said the IFC rejected the company’s proposed three-year repayment schedule after reviewing its financial projections, instead offering a seven-year arrangement that included a two-year moratorium and five years of repayments.
Despite the extended financing arrangement, borrowing from domestic lenders remained expensive, with interest rates reaching 40 per cent.
“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% to the local banks. They can check the records,” Dangote said.
He added that he eventually invited the bankers to dinner six months before the expiration of the 18-month financing arrangement and settled the outstanding loans.
“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.
Dangote Cement’s Obajana Plant
The Obajana facility is Dangote Cement’s largest Nigerian manufacturing plant, with an installed production capacity of 16.25 million tonnes per annum across five production lines.
Commissioned in 2007 with two production lines and a combined capacity of five million tonnes annually, the plant expanded to 10.25 million tonnes in 2012 following the addition of a third line.
Two additional production lines, each with a capacity of three million tonnes annually, were subsequently commissioned in late 2014 and 2020.
