Dangote Cement to double capacity this year

Nigeria's biggest company by market capitalisation, Dangote Cement, expects to double its cement production capacity across Africa this year to 40 million tonnes, its chief executive said on Monday.

Devakumar Edwin told the Reuters Africa Investment Summit in the commercial hub of Lagos that the firm would add 9 million tonnes to its Nigeria operations, bringing them to 29 million tonnes, and open plants across Africa that have been several years in the making, adding a further 11 million tonnes.

Dangote Cement, owned by Africa's richest man Aliko Dangote with a personal fortune of $25 billion, saw its 2013 profits increase by 40 percent to 190.76 billion naira ($1.16 billion), from 135.64 billion naira a year earlier.

"The key driver is the increase in volumes. We have kept a focus on controlling costs, but our focus on volume growth ... has been what has increased our profits," Edwin said.

Dangote has cement plants spanning Africa, from Senegal to South Africa, but most have been in construction phase and between them they contribute less than a million tonnes to the group's current overall production capacity, Edwin said.

That would change this year, as plants in Senegal, Sierra Leone, Cameroon, Zambia, South Africa and Ethiopia come on tap.

"All of them will come into operation in the current year," Edwin said.

Additional capacity in Ivory Coast, Ghana, Liberia, Tanzania, Congo and in Nigeria would mean that by mid-2016 Dangote would have a 60 million tonne capacity, he added.

Almost all of this expansion had been funded with internal cash flows, Edwin said, unlike rivals.

"Other cement majors borrowed heavily for mergers. One of the key reasons we have been able to grow aggressively in the African market is because they are cash strapped and we do not have that problem," he said.

Dangote's main rival in its home market is France's Lafarge.

Dangote has long said it intends to list in London, although a plan to do so last year has been put back. Analysts say corporate governance issues remain a hurdle. Edwin denied that.

He said the company had fulfilled a list of requirements, including appointing an independent board and carrying out appropriate financial reporting.

The reason it was taking time to list was that investors had not fully appreciated the value of Dangote's non-producing assets outside Nigeria. "But that is changing," Edwin said, adding the company hoped to list some time next year.

Investors, analysts react as rebasing pushes Nigeria’s economy to $510 billion

...26^th in the World      ....Largest in Africa

Nigeria showed a path to becoming a G-20 economy as its GDP surpassed South Africa’s to become the largest on the continent, and 26^th in the world after the country updated the statistics used in calculating economic output for the first time since 1990.

The new rebased data shows that the size of the Nigerian economy is now estimated at N80.3 trillion ($510 billion) for 2013, Yemi Kale, head of the National Bureau of Statistics (NBS), said at a press conference to announce the results in Abuja.

That compares with the World Bank’s 2012 GDP figures for South Africa of $384.3 billion. 

“The economy’s structure has changed significantly,” said Kale. “We are witnessing a historic rebasing of our GDP which was not done for more than two decades,” Kale said.

The NBS recalculated the value of GDP based on production patterns in 2010, increasing the number of industries it measures to 46 from 33 and giving greater weighting to sectors such as telecommunications and financial services.

“Nigeria is now officially the largest economy on the continent, which will make it increasingly harder for companies looking at Africa to overlook, especially considering the size of the domestic market and its potential,” Samir Gadio, an Emerging Markets strategist at Standard Bank in London, said in a response to questions.

In 2013, the Nigerian financial markets flourished as foreign portfolio managers in search of higher yielding assets flocked to developing economies.

Total Foreign Portfolio Investment in 2013 grew by 28.78 percent to settle at $17.37 billion, according to data from research and investment firm Meristem Securities.

“I hope the announcement will influence international investors’ perceptions of Nigeria and Africa, helping them to reconsider the scale of the opportunity and potential returns,” said Andrew Alli, CEO of the Africa Finance Corporation (AFC), with a balance sheet size of $2 billion.

“However, it is only through continued investment in basic infrastructure projects, such as road, rail and power generation, that all African countries will really be able to transform prevailing investor sentiment,” Alli said.

Nigerian economy grew by an average of 6.39 percent between 2010 and 2013 with the rebased numbers.

Services sector grew the fastest at 7.72 percent, followed by industry at 7.19 percent. But agriculture showed a slower growth at 2.61 percent.

Nigeria is now the 26th largest global economy (using 2012 figures), coming after countries like United States, which is still the number one at $16.245 billion, China and China at about $$8.227 billion.

Japan comes third at $5.9597 billion, followed by Germany, France, United Kingdom, Brazil, Russia federation, Italy, India, Canada, Australia, Spain, Mexico, Korea Republic, Indonesia, Turkey, Netherlands, Saudi Arabia, Switzerland, Sweden, Norway, Poland, Belgium and Argentina, .

“Nigeria's new GDP data will be positive because with a larger GDP base, ratios such as fiscal deficit to GDP, debt to GDP, and GDP per capita will also improve, meaning Nigeria can be ranked closer to some developed and emerging market economies,” said Abiodun Keripe, research analyst at Lagos based, Elixir Investment Partners Limited.

“It can also lead to better Sovereign/credit rating as with improved ratios, Nigeria can command better rating which will boost confidence,” Keripe said.

Agriculture, in the news series measured around N12.98 trillion in 2010, N14.42 trillion in 2011, N15.91 trillion in 2012 and N17.62 trillion in the 2013 forecast.

Industry stayed at N13.99 trillion in 2010, N17.31 trillion in 2011, N18.66 trillion in 2012 and N20.08 trillion for 2013.

The results also showed that services within the four years went up significantly, recording some N27.22 trillion in 2010, N31.22 trillion in 2011, N36.24 trillion in 2012 and forecast of N41.92 trillion for 2013.

Ngozi Okonjo-Iweala, Minister of finance and coordinating minister for the Economy said the results of the rebasing exercise showed that Nigeria is more diversified than had been thought.

She noted key changes are the noticeable shift in the share of key sectors to the country’s overall GDP.

She said an example is the decline in the share of the agricultural sector to the overall GDP and a rise in the share of services.

She added that since Nigeria’s rebased GDP is expected to be a more accurate reflection of the structure and size of current economic activities in the country, presenting a clearer sectoral distribution and performance, it will help better policy making by government and good analysis of investment potential by investors.

Zenith Bank to float $1 billion Eurobond

…as S&P revises outlooks on five Nigerian Banks to negative

Zenith Bank of Nigeria Plc intends to float up to a maximum of $1 billion in a new Global Medium Term Note programme, with Citigroup Global Markets Limited and Goldman Sachs International, acting as Joint arrangers and dealers.

The net proceeds from each issue of Notes will be used by the Bank for its general banking purposes.

“Under this $1,000,000,000 Global Medium Term Note Programme, Zenith Bank Plc (the “Bank” or the “Issuer”) may from time to time issue notes (the “Notes”) denominated in any currency agreed between the Issuer and the relevant Dealer, subject to compliance with all applicable legal and/or regulatory and/or central bank requirements,” Zenith Bank said in a base prospectus dated April 1, 2014, seen by PATLOGIC.

Eurobond issuances by Nigerian lenders may be seen as attractive by investors, due to the relatively few corporates issuing dollar denominated debt in sub Saharan Africa (SSA) which often leads to a demand supply mismatch.

The growing issuance of Eurobonds by Nigerian lenders, signals the increasing ambitions of banks as opportunities open up in Nigeria, and as increased regulation causes lenders to grow their loan books to boost earnings.

Zenith Banks move to float its Eurobond comes as rating agency Standard and Poor’s (S & P)said it has revised its outlook on five Nigerian financial institutions (Access Bank, First Bank, Stanbic IBTC, GTB and Zenith Bank), to negative from stable due to its earlier revised outlook on the sovereign (Nigeria) which it says was to reflect heightened political and institutional risks.

“We do not rate any bank in Nigeria above the sovereign because of the likely direct and indirect influence sovereign distress would have on the banks' operations,” S & P said in a statement.

“We are therefore revising to negative from stable our outlooks on the five Nigerian banks that we rate at the sovereign foreign currency level.”

The revised outlook for Zenith may mean a slightly higher yield will be demanded by investors as the Eurobond will price off the sovereign benchmark.

Nigeria issued $500m of five year Eurobonds and $500m of 10-year Eurobonds last July, at a yield of 5.375 per cent and 6.625 per cent respectively.

Nigerian banks issued a total of $1 billion of Eurobonds in 2013 as a growing economy and lenders need for dollars to finance power and oil projects feeds demand for offshore borrowing.

Outstanding Eurobonds issued by Nigerian lenders is equivalent to $1.85 billion, 23 percent higher than the $1.5 billion in outstanding sovereign Eurobond issuances.

The lenders issuance of debt in the Eurobond market is also a way to tap cheap funding compared to the domestic corporate bond market, where rates may top 13 percent for similar tenor, although analysts say the banks would have to hedge their exposure to currency risk.

Zenith Bank is the second largest bank in Nigeria by total assets as at 31 December 2012.

The Group provides banking and other financial services in Nigeria, other countries in Africa and Europe with a customer account base of over two million accounts from 340 branches in Nigeria and 29 branches across Africa and Europe as at 31 December 2013.

It had total assets of N3.1 trillion ($20.19 billion) and a Tier 1 capital of N506.8 billion ($3.25 billion) as at that date.

Zenith Bank reported gross earnings for the year ended 31 December 2013, of N351.470 billion.

The establishment of the Global Medium Term Note Programme was duly authorised by a resolution of the Board of Directors of the Bank dated 12 December 2013.