The stock prices of key subsidiaries within the Dangote Group, including Dangote Sugar Refinery and NASCON Allied Industries, have taken a hit, with analysts attributing the decline to foreign exchange losses and the Securities and Exchange Commission’s (SEC) recent rejection of their merger proposal.
Market observers noted that the ongoing inflationary pressures and volatility in the foreign exchange market have exacerbated these challenges. The depreciation of the naira has significantly increased the cost of importing raw materials, leading to tighter profit margins for these companies.
Between May and August 2024, Dangote Sugar Refinery’s stock plummeted by 18.67% from N45.00 to N36.60, largely due to supply chain disruptions and fluctuating sugar prices, which have negatively impacted the company’s financial performance. Similarly, NASCON Allied Industries saw its stock price drop by 12.57%, falling from N37.00 to N32.45 over the same period. In contrast, Dangote Cement reported a 41% increase in its share price, climbing from N419 in May to N591 by early August.
In a statement issued in April, NASCON’s Company Secretary, Adedayo Samuel, confirmed the suspension of the proposed merger with Dangote Sugar Refinery Plc and Dangote Rice Limited. The decision followed feedback from the SEC, which raised concerns over the non-operational status of Dangote Rice Limited. The suspension of the merger, first announced on August 30, 2023, was influenced by these regulatory concerns. NASCON expressed its gratitude to stakeholders for their ongoing support.
“NASCON Allied Industries Plc. (“NASCON”) hereby notifies the Nigerian Exchange Limited and the investing public that, further to its announcement on August 30, 2023, regarding the proposed merger with Dangote Sugar Refinery Plc and Dangote Rice Limited, a decision has been made to suspend the merger at this time. The suspension is due to comments and recommendations from the Securities and Exchange Commission centered around the current non-operational status of Dangote Rice Limited. NASCON appreciates the support of all its stakeholders and will keep the public informed of any developments,” the statement read.
Bisi Bakare, leader of a shareholders’ advocacy group, acknowledged the challenges faced by Dangote Group’s subsidiaries but emphasized their ongoing efforts to pursue growth opportunities. She highlighted that foreign exchange losses, driven by the depreciation of the naira, and inflationary pressures, including high interest rates and rising costs of raw materials and energy, are major hurdles for the manufacturing sector as a whole.
A financial analyst, Ariyo Olugbosun, pointed to the SEC’s rejection of the proposed merger as a key factor behind the recent fluctuations in stock prices. Olugbosun argued that the regulatory decision dampened investor confidence, further exacerbating the volatility in the stock market.
“While foreign exchange losses are a concern, the SEC’s decision on the merger has been a major driver behind the fluctuating stock prices. The SEC’s stance is known to them, but it’s my view that the merger would have enhanced Dangote’s profitability,” Olugbosun said.
Commenting on the performance of Dangote Cement, President of the Progressives Shareholders Association of Nigeria, Boniface Okezie, attributed the price fluctuations to broader market forces affecting the entire sector. He noted that similar patterns are visible in other companies within the cement industry, such as BUA Cement and Lafarge.
“The trend is not unique to Dangote Cement alone. If you examine other companies in the cement industry, like BUA Cement and Lafarge, you’ll notice similar trends. Despite the challenges, Dangote Cement remains more valuable compared to its peers, with BUA Cement following closely behind,” Okezie said.
Regarding Dangote’s much-anticipated refinery project, Okezie pointed out that its performance cannot yet be assessed, as it is not a publicly traded entity. He emphasized the need for swift action to address regulatory issues and prevent further setbacks in the oil and gas sector.
“The refinery isn’t fully operational, and until it is, we can’t gauge its market strength,” Okezie explained. He added that ongoing disputes with the Nigerian National Petroleum Corporation (NNPC) and other regulatory bodies are stalling progress, warning that Nigeria could miss out on significant opportunities if these issues are not quickly resolved.
Okezie also expressed concerns about the potential impact on foreign investment, cautioning that unresolved regulatory challenges could deter international investors. He urged for a quick resolution to maintain Nigeria’s appeal to global investors.
“We urge him [Aliko Dangote] not to lose faith in the Nigerian economy. Though the journey might be tough, his massive investments will yield benefits once the challenges are overcome. It’s a long-term investment, and the rewards may not be immediate, but they will come in due time,” Okezie added.
