Dangote Reveals 40% Interest Rate on Obajana Project from Local Banks

Aliko Dangote, Africa's richest industrialist, has spoken about the high cost of borrowing in Nigeria, revealing that his company paid interest rates of up to 40% to local banks while financing the construction of its Obajana Cement plant. The plant, located in Kogi State, had an initial estimated cost of $180m but eventually cost around $1bn due to various challenges. Dangote made these remarks at the 25th annual conference of Women in Management and Business in Lagos.

Dangote attributed the high cost of the project to the high cost of credit, inadequate infrastructure, and operational challenges. He noted that the company had to rely on local bank financing at a time when Nigerian banks had a capital base of about N25bn. The company's initial underestimation of infrastructure requirements also contributed to the increased cost, as it had to invest in gas pipelines, fuel facilities, and power generation.

The construction of the Obajana Cement plant began with an initial investment and two production lines with a combined capacity of five million tonnes per annum in 2007. The facility expanded to 10.25 million tonnes in 2012 and further increased to 16.25 million tonnes annually across five production lines by 2020. Dangote also discussed the challenges surrounding the development of his company's petroleum refinery, which was initially met with skepticism by international engineering firms.

Dangote's company originally planned a refinery with a capacity of 300,000 barrels per day but later increased the target to 650,000 barrels per day. Despite concerns about the scale and risks involved, the company assumed the responsibility of serving as its own engineering, procurement, and construction contractor, enabling it to deliver the project. The refinery has since achieved a capacity of 710,000 barrels per day.

The industrialist urged women entrepreneurs to develop ambitious business plans, establish clear targets, and remain confident in their ability to execute challenging projects. He advised entrepreneurs to remain resilient in the face of setbacks, stressing that building successful businesses and executing large-scale industrial projects required determination and the ability to withstand pressure.

Dangote identified poor infrastructure as one of the major constraints to industrial development in Nigeria, noting that businesses were increasingly compelled to provide facilities that should ordinarily be supplied by the government. He disclosed that the Dangote Petroleum Refinery was expected to achieve the highest profitability on the African continent within 55 days.

The conference, organized by Women in Management and Business, marked its 25th anniversary, with the Founding Chairperson and Trustee, Omobola Johnson, reflecting on the organization's journey and efforts to promote women's participation in business and management. Johnson highlighted the organization's achievements, including its continued existence and growth over the past 25 years, and its efforts to challenge perceptions about women's ability to work together.

Key points

• Dangote's company paid 40% interest to local banks during the construction of the Obajana Cement plant.
• The Obajana Cement plant had an initial estimated cost of $180m but eventually cost around $1bn.
• Dangote's petroleum refinery has achieved a capacity of 710,000 barrels per day.