• Monday, July 22, 2024
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BusinessDay

Dangote’s long road to London

Dangote shelves steel investment plans amidst monopoly concerns

Aliko Dangote has always liked making things to sell. As a child, he boiled up sugar to make sweets. He sold around town. These days he sells refined crude oil products and now aims for a dual listing on the London and Lagos bourses.

It all started in 1977 when 21-year-old Aliko, fresh from a business degree from Egypt’s Al-Azhar University, begged his uncle for a N500,000 loan (then worth about $325,000).

Dangote’s family were wealthy Muslims from northern Nigeria. His father, Mohammed, was a prosperous commodities trader. Still, the real money was made by his maternal grandfather, Sanusi Dantata, whose groundnut empire made him the wealthiest man in West Africa.

Dangote could have gone into business with either his father or uncle. Instead, he chose to strike out on his own, using the loan to start a general trading company, importing bulk commodities like sugar and rice.

Read also: Dangote accuses IOCs of plotting refinery downfall

Business was good, but he soon discovered a gap in the market.

Why was Nigeria importing sugar when it could be producing its own? Why was the country bringing in expensive cement when it sits atop one of the world’s largest lime deposits? Why was Africa’s biggest oil-producing country importing all of its refined products?

The answers to these questions – conflict, corruption, incapacity and uncertainty – lie at the heart of Africa’s decades of stunted development.

Dangote, however, was undeterred and resolved to move into manufacturing: first salt, then flour and sugar and then cement, which turned out to be the really big money-spinner. He has now entered the refining business.

First trial with cement

The cement business considered raising equity in London back in 2010.

At the time, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley helped it prepare a sale that could have raised as much as $5 billion.

“We want to list in London next year,” Dangote said in an interview in 2012. “By then, the upside to our business will be much bigger than today.”

Dangote said that the company was on track to meet the stringent corporate governance requirements for a premium listing and that he would give up his current role as chairman.

“My plan is to have different faces [on the board],” he said. “The face of the chairman will not be Aliko Dangote, it will be somebody else, a professional who is well-respected within investment circles,” Dangote said.

In October 2020, Dangote Industries announced delaying plans to list on the London Stock Exchange, rather choosing other options like boosting exports and the Nigerian company’s foreign-exchange reserves.

Temilade Aduroja, head of investor relations at Dangote Group, said the London listing is not something which will happen in the short to medium term.

“We are focused on our export strategy and increasing our foreign-currency revenue.”

The Lagos-based cement producer had initially planned an initial public offer on the London Stock Exchange. However, this would be delayed till at least 2023, according to Aduroja.

Another trial with Dangote Refinery

The board of Dangote Refinery has hinted on plans for dual listing of the company’s shares on the Nigerian Stock Exchange (NSE) and London Stock Exchange (LSE) as part of efforts to boost its capital base for sustainable growth

Devakumar Edwin, a senior executive of the multi-billion dollar refinery plant, when asked to comment on Dangote’s statement to journalists, told Reuters: “We have listed all our businesses. The Nigerian Stock Exchange, (NSE) will not have adequate depth to handle exclusively the petroleum refinery. We would have to take it to London Stock Exchange, (LSE) but also list in NSE.”

The refinery, which is Africa’s largest plant with capacity to refine up to 650,000 barrels per day (bpd), had gulped about $20 billion in cost before it commenced refining operations about two months ago.

Experts said a successful London listing would provide Dangote with a wider pool of international investors and potentially a higher valuation.

Read also: Dangote refinery enters Asian market, ships first low-sulfur oil to Singapore

However, BusinessDay’s findings showed the LSE has stricter listing requirements compared to the NGX.

“Dangote will need to comply with stricter financial reporting standards and corporate governance regulations,” Aisha Mohammed, an energy analyst at the Lagos-based Centre for Development Studies, said.

While Dangote has successfully listed other companies on the NGX, navigating the LSE’s process will be a new experience.

“The company might need to adjust its financial disclosures and internal controls to meet the LSE’s standards,” Mohammed added.

Despite these challenges, the potential benefits of a London listing are significant. A successful listing would be a major milestone for Dangote and the Nigerian economy.

It would also raise Dangote’s profile among international investors and solidify its position as a major player in the global oil and gas industry.