Dangote’s credit rating downgraded over liquidity issues, naira devaluation

All may not be well for Africa’s richest man, Alhaji Dangote as Fitch Ratings has downgraded Dangote Industries Limited’s creditworthiness, citing a “significant deterioration in the group’s liquidity position” among other factors.

The National Long-Term Rating of the corporation was downgraded from ‘AA(nga)’ to ‘B+(nga)’.

Fitch has placed both ratings on Rating Watch Negative (RWN).

DIL operates what will be Africa’s largest oil refinery once fully operational, a 650,000 barrel per day facility in Nigeria.

It also controls Dangote Cement.

“The downgrade reflects significant deterioration in the group’s liquidity position,” Fitch said, adding that the group had underperformed its operational and financial expectations and was also hit by devaluations to the naira currency.

“We do not expect a positive rating action until the company’s liquidity position improves substantially”, Reuters reported.

Nigeria’s currency devaluation in 2023, which sent the naira to record lows, led to a 2.7 trillion naira ($1.74 billion) foreign exchange loss for Dangote last year, Fitch said.

Dangote faces a “mismatch” between dollar-denominated debt and domestic revenue in naira, the ratings agency said.

The company’s oil refinery operated at about 50% capacity in the first half of the year, at 325,000-375,000 bpd, Fitch said, while Dangote’s fertiliser business was affected by inadequate gas supply.

Fitch said it expects Dangote’s margins in cement to drop further this year, dented by a limited ability to pass on higher costs to consumers, while demand remains soft.

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