electricity crisis
Dangote Industries Limited (DIL) issued a Series 1 Bond offer under on June 30th this year under its ₦300bn Debt Issuance Programme.
The deal comprised of two tranches of seven and ten years. Each tranche priced at the “higher range” of the initial price guidance, of 12.25% to 12.75% and 13.00% to 13.50% for each tranche respectively, says Abiodun Keripe, managing director, Afrinvest, Research and Consulting.
The bond was oversubscribed, with ₦10bn demand for the sever-year tranche and ₦176bn for the ten-year offering. The deal was approved by the Securities and Exchange Commission of Nigeria (SEC) on 16th July, nearly three weeks after the initial issue.
“We are very pleased to have set this remarkable milestone, showcasing the depth and liquidity of the Nigeria Debt Capital Market”, says Olakunle Alake, Group Managing Director of Dangote Industries in a statement. “The success of this transaction further demonstrates investor confidence in our credit story and the appreciation of the work done by the Group across several key sectors that are crucial to the development of the continent.”
Refinery project
Proceeds from the bond will be used to part-finance the Dangote Petroleum Refinery Project, a 650,000 barrels per day integrated refinery and petrochemical project under construction in Lagos.
The refinery is scheduled to begin operations in the first half of 2023, after several delays due to supply chain issues triggered by the Covid-19 global pandemic.
“Market participants did evaluate the delay of the refinery as a concern,” says Keripe. “However, the fertilizer plant, which is already operational, has solid cash flows and provides a cushion [for investors].”
READ MORE Nigeria's naira is exposed without higher crude exports and an operational Dangote refinery
Dangote’s $2.5bn fertiliser plant in Lagos started production on 22 March 2022. With capacity of 3m tonnes per year, it is hoped that the plant will be able to fulfil local demand as well as earmark a proportion of production for export.
Good timing
The deal has come at a time when Nigeria’s oil and oil refinery sector are struggling to keep up with global demand. Between January and February this year, Nigeria lost around 115,000 barrels per day due to vandalism and crude oil theft, which continues to ravage the industry.
And despite the rising price of crude oil – now close to $110 a barrel as of 30 June 2022 – Nigeria has been unable to financially benefit given low processing volumes: although the largest oil producer in Africa, Nigeria pumps over 1.3m barrels of oil a day but is only able to process 1% of the total volume.
Standard Chartered Bank was the lead issuing house. Stanbic IBTC, Meristem and Vevita were joint issuing houses on the deal.
Dangote Industries is rated AA+ by GCR (an affiliate of Moody’s Investor Services) and AA(nga) by Fitch. Proceeds from the bond will be used to part-finance the Dangote Petroleum Refinery Project, which is currently scheduled to commence operations in the first half of 2023.
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