The recent devaluation of the naira is predicted to have repercussions on the ratings of Dangote Industries Limited. Fitch Ratings, an international rating agency, announced on Monday that DIL’s national rating has been downgraded to ‘B+(nga) from ‘AA(nga),’ with its ratings placed on the Rating Watch Negative list.
Furthermore, the senior unsecured debt rating issued by Dangote Industries Funding Plc has been revised downward to ‘B+(nga)’ from ‘AA(nga).’ On Tuesday, GCR Ratings reaffirmed DIL’s national scale long-term and short-term issuer ratings as AA+(NG) and A1+(NG) respectively.
Both rating agencies highlighted the naira devaluation’s impact on the group’s liquidity rating. Fitch mentioned that the downgrade reflects a significant decline in the group’s liquidity position due to various factors.
In a statement, GCR Ratings acknowledged the positive contribution of the new refinery to DIL’s business profile but also expressed concerns about the devaluation of the naira affecting profitability and financial standing due to considerable foreign debt exposure.
The devaluation of the naira occurred in June 2023 when the Central Bank of Nigeria made changes to the foreign currency market segments, leading to persistent volatility in the foreign exchange rate despite intervention efforts.
Fitch highlighted the immediate risk of refinancing for Dangote Industries Limited, citing specific debt servicing requirements related to financing the construction of Dangote Oil Refining Company.
The agency also mentioned that delays in meeting funding requirements could elevate the likelihood of financial restructuring or default, resulting in further downgrades. The naira devaluation in June 2023 caused the group to incur significant foreign exchange losses.
DIL has senior secured debt at subsidiary levels totaling $2.7bn as of end-2023, representing 49% of the total group debt. The company also has raised senior unsecured debt of N350bn with maturities in 2029 and 2032 to fund capital expenditure needs.
GCR Ratings highlighted the potential impact of the Nigerian National Petroleum Corporation Limited’s stake in the Dangote refinery on the group’s debt repayment capabilities.
NNPCL’s decision not to acquire an additional stake in the refinery may pose challenges for DIL in repaying its debt obligations. Despite uncertainties, GCR acknowledged the growth potential of the Dangote Group following the commencement of refining operations.