Dangote reveals how poor infrastructure pushed Obajana plant cost to $1bn

Nigeria’s infrastructure gaps forced Dangote Industries Limited to spend far more than initially planned on its Obajana Cement plant in Kogi State, with the company also paying local banks interest rates of up to 40 per cent, its founder, Aliko Dangote, has disclosed.

Dangote said the company had initially planned to spend about $180m on the project but eventually incurred a cost of $1bn after discovering that essential facilities, including gas pipelines, fuel infrastructure and power plants, were not available as expected.

He made the disclosure on Thursday at the 25th annual conference of Women in Management and Business in Lagos, where he urged women entrepreneurs to pursue ambitious industrial investments despite the challenges of doing business in Nigeria.

Recounting the financial pressure involved in building the plant, Dangote said his company had borrowed from local banks when their capital stood at N25bn.

“You won’t believe how much interest we were paying when we built Obajana (Kogi State, Nigeria). I tell you, we were able to do it when the banks were at N25bn capital. And we took on a project of $180m,” he said.

He explained that the company initially relied on government assurances that public infrastructure, particularly electricity, would be available to support the project.

“So we ended up having a problem. We didn’t put in a gas pipeline, we didn’t put fuel in, we didn’t put in a power plant. All these things, because the government announced that we’d be having enough power, we’d be having enough this and that,” he said.

The infrastructure shortfalls increased the project’s cost and forced the company to seek additional financing from the International Finance Corporation.

Dangote said the IFC rejected the company’s proposed three-year repayment plan after reviewing its financial projections, opting instead for a seven-year arrangement.

“We wanted to pay within three years, but when the IFC used their own financial model, they said our business plan was wrong. They gave us seven years. They said in the first two years we cannot pay anything. Then, in five years, is the payment period,” he said.

Despite the longer repayment arrangement, borrowing from Nigerian banks remained expensive, with interest rates reaching 40 per cent.

“But because our interest rates were high, we were paying combined. Also, I don’t want to mention the name. But we were paying interest at 40 per cent to the local banks. They can check the records,” the billionaire businessman said.

He disclosed that he settled the outstanding loans ahead of the agreed financing period after inviting the bankers to dinner.

“On the 18th month, six months before the expiry, I invited the bankers to dinner, and at the end of the dinner, I gave everybody their cheque. I paid off,” he said.

Obajana is the largest Dangote Cement factory in Nigeria, with an installed production capacity of 16.25 million tonnes per annum across five production lines.

Commissioned in 2007 with two lines and a combined capacity of five million tonnes annually, the plant expanded to 10.25 million tonnes in 2012 after the addition of a third line. Two further lines, each with a capacity of three million tonnes, were added in 2014 and 2020.

Dangote also recounted the difficulties his company faced in developing its petroleum refinery, saying international engineering companies and other industry players initially doubted the feasibility of the project.

He said the company had initially planned a refinery with a capacity of 300,000 barrels per day but later increased the target to 650,000 barrels per day, despite warnings about the scale of the investment.

According to him, some international engineering, procurement and construction contractors declined to participate because they considered Nigeria too risky.

Dangote said his company eventually assumed the role of its own engineering, procurement and construction contractor and delivered the project.

“We’re able not only to deliver the 650,000, which they say will not be done. We now are at 710,000 barrels,” he said.

He added that the refinery was expected to record the highest profitability on the African continent within 55 days, describing profitability as the company’s immediate priority.

The industrialist urged women entrepreneurs to set ambitious goals and remain confident in their ability to achieve them.

“Don’t let anybody tell you that you are not able to do it. You must think very, very big. You must be very ambitious. You must give yourself a target and believe that you can deliver that target,” he said.

He also identified inadequate infrastructure as a major obstacle to business growth, noting that companies were increasingly spending their own money to provide facilities that should ordinarily be available through public investment.

“We are facing a lot of issues in terms of infrastructure. And right now, sometimes, what we do is we put the money down. I would like to build this infrastructure, and then we just do it on our own,” he said.

Dangote urged business leaders not to be discouraged by setbacks, saying industrial investment required resilience.

“There is nothing in life that is easy. So you must say that yes, it’s difficult for me, but I can surmount all these pressures,” he said.

Earlier, the Founding Chairperson and Trustee of WIMBIZ, Omobola Johnson, said the organisation had sustained its 25-year journey through inclusion, mutual respect, shared leadership and succession planning.

She said the founders had challenged the perception that women could not work together by building an institution that had endured for a quarter of a century.

“We countered the fallacy that women cannot work together. We have worked together for 25 years, and we have built an institution that has endured, stood the test of time,” Johnson said.

She added that the founders had prioritised their collective vision over personal interests and ethnic differences while promoting diversity and shared purpose.