Founder and President of Dangote Industries Limited, Aliko Dangote, has disclosed that his company paid interest rates of up to 40 per cent on loans obtained from Nigerian banks to finance the construction of the Obajana Cement plant in Kogi State.
Dangote said the project, initially conceived at about $180 million, eventually cost approximately $1 billion after infrastructure deficiencies and other operational challenges forced the company to make additional investments.
He made the disclosure on Thursday at the 25th annual conference of Women in Management and Business in Lagos, where he urged women entrepreneurs to think big, embrace industrial investments and remain resilient despite the difficulties associated with doing business in Nigeria.
Recounting the financing of Obajana, Dangote said the company embarked on the project at a time when Nigerian banks had a capital base of about ₦25 billion.
“You won’t believe how much interest we were paying when we built Obajana. I tell you, we were able to do it when the banks were at ₦25bn capital. And we took on a project of $180m,” he said.
Dangote explained that the company initially did not provide some essential infrastructure, including a gas pipeline, fuel facilities and a power plant, because it expected government-provided infrastructure and electricity to be adequate.
“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.
According to him, the infrastructure shortfalls substantially increased the cost of the project, eventually pushing it to about $1 billion and forcing the company to seek additional financing from the International Finance Corporation.
Dangote said his company initially proposed a three-year repayment period, but the IFC rejected the financial projections and offered a seven-year arrangement instead.
“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.
Despite the longer repayment arrangement, Dangote said borrowing domestically remained extremely expensive, with interest rates on loans from Nigerian banks reaching 40 per cent.
“But 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 per cent to the local banks. They can check the records,” he said.
He recalled that he eventually invited the bankers to dinner and settled the outstanding loans before the financing arrangement expired.
“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,” Dangote said.
Obajana is Dangote Cement’s flagship facility and its largest factory in Nigeria, with an installed capacity of 16.25 million tonnes per annum across five production lines.
The plant was commissioned in 2007 with two lines producing a combined five million tonnes annually. Its capacity increased to 10.25 million tonnes in 2012 with the addition of a third line, while two further three-million-tonne lines were subsequently added in 2014 and 2020.
Dangote also recounted the difficulties his company faced while developing the Dangote Petroleum Refinery, saying some international engineering companies and industry players initially doubted that the project could be delivered.
He said the refinery was originally planned to process 300,000 barrels of crude oil per day before the company increased its ambition to 650,000 barrels per day.
According to him, some international engineering, procurement and construction contractors declined to undertake the project because they considered Nigeria a difficult and risky environment in which to execute such a large investment.
Dangote said his company eventually assumed the role of its own engineering, procurement and construction contractor.
“We’re able not only to deliver the 650,000, which they say will not be done. We now are at 710,000 barrels,” he said, referring to the refinery’s current operating capacity.
Drawing lessons from the Obajana and refinery projects, Dangote urged women entrepreneurs not to allow doubts expressed by others to discourage them from pursuing ambitious investments.
“Don’t let anybody tell you that you are not able to do it. You must think very, very big. You must be very ambitious. You must give yourself a target and believe that you can deliver that target,” he said.
He identified inadequate infrastructure as one of the major challenges confronting businesses in Nigeria, noting that private companies were frequently compelled to spend their own resources providing facilities that should ordinarily be available through public infrastructure.
“We are facing a lot of issues in terms of infrastructure. And right now, sometimes, what we do is we put the money down. I would like to build this infrastructure, and then we just do it on our own,” he said.
Dangote also urged business owners to remain resilient when faced with setbacks, saying entrepreneurship and industrial development inevitably involved difficulties.
“There is nothing in life that is easy. So you must say that yes, it’s difficult for me, but I can surmount all these pressures,” he said.
He further said the Dangote Petroleum Refinery was expected to become the most profitable business on the African continent within 55 days, describing profitability as the company’s immediate priority.
Earlier, WIMBIZ Founding Chairperson and Trustee, Omobola Johnson, reflected on the organisation’s 25-year history and its efforts to create a sustainable platform for women in business and management.
Johnson attributed WIMBIZ’s longevity to inclusion, mutual respect, shared leadership and effective succession planning.
She said the organisation had also disproved the perception that women could not work together successfully over a sustained period.
“We countered the fallacy that women cannot work together. We have worked together for 25 years, and we have built an institution that has endured, stood the test of time,” Johnson said.
She added that the founders placed their collective vision above personal interests and ethnic differences while promoting diversity, cooperation and shared purpose.
Post Title: “We Paid 40% Interest To Local Banks” — Dangote Recalls Obajana Financing Struggle, Urges Entrepreneurs To Think Big By Naijaonpoint.