Africa and Nigeria’s richest man, Aliko Dangote was reported to have lost over $3 billion on Monday according to the Bloomberg Billionaire index. The loss was mainly attributed to the slide in the value of the Naira following the introduction of the flexible exchange rate policy of the Central Bank. The Naira depeciated from about N197 to about N282 on the first day the currency was on a free float.
Despite this seemingly bad news for Aliko Dangote’s personal wealth, it’s not so bad for his group of companies according to an article from Reuters. The article reveals just how much the Billionaire’s group of companies have bought in foreign exchange from the CBN at the much despite official rate of N197.
Reuters examined foreign currency transactions made during an 11-week period in March to May this year. Over that time, Dangote businesses were able to buy at least $161 million in hard currency from the central bank. That was around nine percent of all the hard currency the bank sold over the period. In a single week in March, one dollar in every eight went to Dangote companies. There is not enough data to see how that stacks up with the companies’ share of foreign trade.
$161 millions dollars which cost his companies a total of N31.7 billion would have cost him about N45.4 billion at today’s exchange rate. Aliko Dangote and his companies have thus saved a massive N14 billion just by delaying the floating of the Naira. We are not in any way surprised by this considering the CBN’s Governors own statement that they were going to support Dangote and his group of companies.
“Your ongoing 14 billion dollar refinery investment will enjoy our support, no doubt. We are doing this to fast-track the importation of equipment you need for a speedy completion of that project and to encourage other Nigerians to follow your lead,” Godwin Emefiele
This will surely anger people critical of Dangote and his strong hold of the economy especially if you consider his past remarks suggesting he is against devaluation.
“We have good strategy in place, the volatility of the foreign exchange will not affect our operations. I am not an advocate of devaluation of our currency, even if that had happened; it would not have affected your company,” Dangote
It’s reasons like this that some of us advocate for a free float of exchange rate rather than devaluation which still permits having a fixed exchange rate. At least it gives everyone a semblance of an equal level playing field.
You can read the Reuters article here