Fitch Ratings has reported that Dangote Group plans to sell a 12.75% stake in its refinery due to liquidity issues. The divestment aims to service a large loan due in August 2024. Fitch downgraded Dangote Industries Limited's ratings amid financial strain, though GCR Ratings maintains a higher national scale rating.
Fitch Ratings has disclosed that Dangote Group intends to divest a 12.75% stake in its Dangote Petroleum Refinery due to ongoing liquidity concerns. The decision comes as the group aims to use the proceeds to address a substantial syndicated loan that is set to mature on August 31, 2024.
According to Fitch, the divestment plan is critical for servicing the loan, given the group’s current financial pressures. The agency noted that as of 2023, Dangote Industries Limited (DIL) had N1.4 trillion in readily available cash and N400 billion in its first-quarter 2024 report, but lacks sufficient liquidity to meet upcoming debt obligations. The company's liquidity is further strained by foreign exchange fluctuations and capital requirements for the coming years.
The situation is compounded by Fitch’s recent downgrade of DIL’s long-term credit rating to 'B+(nga)' from 'AA(nga)', with the senior unsecured debt rating also being lowered. The downgrade reflects a significant deterioration in the group’s financial health, including lower-than-expected disposal proceeds and operational underperformance.
In September 2021, the Nigerian National Petroleum Corporation (NNPC) acquired a 20% stake in the Dangote refinery for $2.76 billion, but by July 2024, it was revealed that NNPC’s holding had reduced to 7.2%. Fitch had previously indicated that NNPC had the option to purchase the remaining 12.75% stake by June 2024, which has not been exercised.
Despite the challenges, GCR Ratings has maintained a higher national scale long-term rating for DIL, reflecting differing assessments of the company's financial stability.
