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Analysis: How Exchange Rate Contributed To Dangote’s Misfortune

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Nigeria’s business mogul Aliko Dangote was overtaken on Friday by South Africa’s Johann Rupert & Family as the richest man in Africa for the first time in 10 years.

At the time of filing this report, the 66-year-old Kano-born billionaire is number 170 on Forbes’ Real-time Global Billionaires List with a net worth of $10.7 billion, as against his South African counterpart, who is ranked 145 with a net worth of $11.9 billion.

Reason for Dangote’s misfortune

Some analysts believe the impact of the exchange rate and investment performance may be the reason for Dangote’s recent losses, especially the unification of the naira’s exchange rate system.

At the close of trading in Lagos on Wednesday last week, the naira fell 29% to N664 to the dollar, according to local exchange operator FMDQ. The Central Bank of Nigeria (CBN) earlier set a sell-dollar exchange rate for exporters and investors at N610.20, 22% below Tuesday’s price.

The billionaire’s fortune moderated in dollar terms even as the local stock market and government bonds rose as investors welcomed the latest prospects of President Bola Tinubu’s string of reforms. Most of Dangote’s fortune comes from 86% of the listed Dangote Cement shares.

He owns shares in the company directly and through his conglomerate, Dangote Industries. The $19 billion refinery recently commissioned by President Buhari is not yet operational and thus is not included in the valuation.

Currently, Dangote Group’s main listed companies are Dangote Cement, Dangote Sugar, and Nascon Allied Industries.

Dangote’s other public assets include shares in Dangote Sugar, Nascon Allied Industries, and United Bank for Africa. The company’s interests in public companies are held directly and through Dangote Industries, which also includes closely related companies engaged in food manufacturing, fertiliser, petroleum, and other industries.

Dangote’s fertiliser plant is capable of producing up to 2.8 million tonnes of urea per year. Its net worth is based on a discounted cash flow analysis by KPMG. This rating was confirmed by an external analyst.

The magnate also owns six residential and commercial properties in Lagos. These will be valued using a capitalization method using rental income provided by Dangote spokesperson Anthony Chiejina and CBRE Broll Nigeria’s valuation rate.

The company’s cement equities rewarded investors who took positions in Dangote Cement shares in 2020 and exited on June 31, 2023, with a return of 140.26% through price appreciation and more than 11% in the first half of 2023.

For its 2022 earnings results, the company paid a dividend of N20.00 per share, which has led to a new bid for its shares.