Recently, Fitch Ratings downgraded Dangote Industries to ‘B+(nga)’ from its previous rating of ‘AA(nga)’. This downgrade follows a National Long-Term Rating of ‘AA(nga)’.
Despite being affirmed AA(nga) by Fitch in August 2023, the latest rating reflects a significant decline in the group’s liquidity position.
According to Fitch, Dangote Industries Funding Plc’s senior unsecured debt rating was revised due to various factors, including lower disposal proceeds, operational underperformance, and currency devaluation.
The rating firm highlighted concerns about the lack of audited accounts for 2023 as a governance issue and uncertainty regarding the group’s debt refinancing ability.
Fitch emphasized the immediate debt servicing requirements related to the syndicated loan taken for Dangote Oil Refining Company’s construction. Any delays in meeting these requirements could lead to further rating downgrades.
The group faced challenges due to currency devaluation and a significant foreign exchange loss in 2023. The debt structure includes senior secured debt at subsidiary levels and shareholder loans from its parent company.
Additionally, Fitch discussed the impact of Nigerian National Petroleum Corporation’s decision not to acquire an additional stake in Dangote Refinery, which may affect the group’s debt repayment plans.
In response, the group plans to divest a stake in Dangote Oil Refining Company in 2024 to address debt obligations. However, the timing and success of this divestment remain uncertain, according to the commentary.