Founder 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 its Obajana Cement plant in Kogi State.
Dangote said the high borrowing costs, combined with inadequate infrastructure and operational difficulties, contributed to the financial challenges encountered during the development of the facility, which has since become Dangote Cement’s flagship Nigerian plant.
He made the disclosure on Thursday at the 25th annual conference of Women in Management, Business and Public Service in Lagos, where he encouraged women entrepreneurs to venture into industrial businesses and pursue ambitious investment plans.
Recounting the experience, Dangote said the company embarked on the Obajana project when Nigerian banks had a capital base of about N25bn.
He recalled that the project initially involved an investment of about $180m but eventually expanded into a much larger undertaking.
“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 N25bn capital. And we took on a project of $180m,” he said.
Dangote explained that the company initially expected the government to provide adequate public utilities and therefore did not make sufficient provision for critical infrastructure, including gas pipelines, fuel facilities and power plants.
“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,” he said.
According to him, the infrastructure gaps contributed to a substantial increase in the project’s cost, which he put at about $1bn, forcing the company to seek additional financing.
He said the company approached the International Finance Corporation, which rejected its proposed three-year repayment plan after assessing its financial projections.
Dangote said the institution instead offered a seven-year arrangement, with a two-year grace period followed by five years of repayment.
Despite the longer repayment structure, he said local bank financing remained expensive, with interest rates reaching 40 per cent.
“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.
Dangote added that he eventually invited the bankers to dinner six months before the expiration of an 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.
Obajana is Dangote Cement’s largest Nigerian factory, with an installed production capacity of 16.25 million tonnes annually across five production lines.
The plant was commissioned in 2007 with two production lines and an initial capacity of five million tonnes per annum. Its capacity increased to 10.25 million tonnes in 2012, followed by further expansions in 2014 and 2020.
Dangote also recounted the challenges involved in developing his company’s petroleum refinery, saying some international engineering, procurement and construction contractors initially considered the project too risky because it was being undertaken in Nigeria.
He said the company initially planned a refinery with a capacity of 300,000 barrels per day but later increased the target to 650,000 barrels per day.
According to him, the company eventually took responsibility for the engineering, procurement and construction work after some international contractors declined to participate.
“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.
The industrialist urged women entrepreneurs to remain ambitious, establish clear business targets and persevere through difficulties.
“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,” he said.
He identified infrastructure deficits as a major constraint on Nigerian businesses, noting that companies sometimes have to finance facilities that would ordinarily be provided through public investment.
Earlier, WIMBIZ founding chairperson and trustee, Omobola Johnson, reflected on the organisation’s 25-year history, highlighting inclusion, mutual respect, shared leadership and succession planning as factors behind its sustainability.
Johnson said the organisation had demonstrated that women could work together to build lasting institutions.
“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,” she said.
