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Dangote: The King cement maker moving against all odds

Dangote Cement Plc is Nigeria’s multinational publicly traded cement company. It is involved in the production of cement in Africa. 

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Dangote finally addresses how he amassed his wealth without father’s money, Dangote talks about when he will buy Arsenal , Aliko Dangote defends border closure, reacts to Dangote Cement result, Can Nigeria's King Cement maker Dangote Cement withstanding COVID-19?, Aliko Dangote and his slide from $25 billion to $7 billion

Dangote Cement Plc is Nigeria’s multinational publicly traded cement company. It is involved in the production, packaging, exportation and distribution of cement in Nigeria and other parts of Africa.

Dangote Cement Plc is the largest company traded on the Nigerian Stock Exchange with a market capitalization of N1.99 trillion as at April 10, 2020.

The Nigerian cement industry may be set for a difficult year on account of the COVID-19 pandemic, and it is expected that the sector’s full recovery could take at least 2 years, in line with the macro guidance of African finance ministers.

Clearly, the spread of COVID-19 has altered the global economic outlook for this year. The virus outbreak has led to border closures, as well as restrictions on constructions and other non-essential business activities.

(READ MORE: Dangote Cement Plc: Frail macro conditions to pressure earnings in 2020)

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The Nigerian cement market is likely to underperform the rest of Africa, given that imposed restrictions in its country of domicile have been concentrated in key construction hubs like Lagos, which cumulatively accounts for about 48.0% of the country’s GDP.

Dangote Cement reveals share buyback plans, Dangote Cement Plc: Frail macro conditions to pressure earnings in 2020, Can Nigeria's King Cement maker Dangote Cement withstanding COVID-19?

Dangote cement factory

It’s expected that the shutdown of activities in these zones is likely to last till the end of the third quarter of 2020. In line with global expectations, DANGCEM is expected to report contractions in cement volumes in Nigeria and across its pan African operations in 2020.

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In addition, Dangote cement earnings will likely be under strain by greater income tax deductions going forward, following the expiration of pioneer tax grants on Ibese Lines 3 & 4 and Obajana Line 4 in February 2020.

Consequently, the company recorded an increase in distribution cost in the 2019 financial year as a result of an increase in its number of truck fleet and the proportion of sales distributed by trucks to customers.

In its 2019 released audited financial results, the company posted a revenue of N891.7 billion and pre-tax profit declined by 16.7% year on year to N250.5 billion in the financial year of 2019.

(READ MORE: Dangote Cement woos investors with N100 billion issue)

Profit after tax, however, dropped sharply, down 48.5% year on year to N201.2 billion in 2019 vs N390.9bn recorded in 2018.

Similarly, its profit margin pressures are likely to start after the operating line, with drags coming in the form of higher interest expense N63.8 billion vs N50.1 billion in 2019.

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Fundamentally, the company has had a traditionally strong cash flow position, even during 2016 recession; furthermore, it has a dividend yield of 13.31 % and earnings per share of 11.79, as at April 10, 2020. With a look at the stock on the chart where DANGCEM trades at N117, showing a series of spinning top forming on the price support level, it’s thus likely a strong bullish bias signal on the mid and long term review on the stock.

Olumide Adesina is a French-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment Trading. Member of the Chartered Financial Analyst Society. Behavioral Finance, Duke University. You can follow Olumide on twitter @tokunboadesina or email [email protected]

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Naira stabilizes across forex markets, as BDCs get another round of dollar allocation

The Naira remained stable against the dollar to close at N467/$1 on Thursday.

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FOREX, NAFEX market turnover drop by 59%, Naira crashes to N470/$1 as currency uncertainty worsens 

Forex turnover improved by 43% as Nigeria’s exchange rate at the NAFEX window stabilized to close at N386/$1 during intraday trading on Thursday, September 24.

Also, the naira remained stable, closing at N467/$1 at the parallel market on Thursday, September 24, 2020, after another round of forex allocation to BDC operators by CBN.

Parallel market: At the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N467/$1 on Thursday, according to information from Abokifx, a prominent FX tracking website. This was the same rate that it was exchanged for on Wednesday, September 23.

Currency developments

  • The local currency has strengthened by about 7.8% within the last one week at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.
  • The CBN has sold over $200 million to BDCs since the resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market, and discourage hoarding and speculation.
  • However, the exchange rate against the dollar has failed to sustain the initial gains made, after the CBN announced plans to provide liquidity.
  • BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders, as it was inadequate to meet their expenses.
  • We also noted that forex traders monitored during the previous week, appeared to hoard forex, as they anticipated further depreciation in the market.
  • There has been a drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure, and creates a volatile situation in the foreign exchange market.

NAFEX: The Naira remained stable against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N386/$1.

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  • This was the same rate that it exchanged for on Wednesday, September 23.
  • The opening indicative rate was N386.13 to a dollar on Thursday. This represents a 31 kobo gain, when compared to the N386.44 to a dollar, that was recorded on Wednesday.
  • The N390.34 to a dollar is the highest rate during intraday trading, before closing at the rate of N386/$1. It also sold for as low as N383/$1 during intraday trading.

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window, increased by 42.6% on Thursday, September 24, 2020.

  • According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $69.22 million on Wednesday, September 23, 2020, to $98.65 million on Thursday, September 24, 2020.
  • The CBN had in the past few weeks moved to clear the huge backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
  • The improvement in forex supply after yesterday’s drop, reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
  • The average daily forex sale for last week was about $34.5 million, which represents a drop from the $58.52 million that was recorded the previous week.
  • Total forex trading at the NAFEX window in the month of August was about $857 million, compared to $937 million in July.
  • In the latest report on Monetary, credit, foreign trade, and exchange policy guidelines for fiscal year 2020/2021, the CBN lamented that forex market pressure, which is as a result of speculative activities in the BDC and I & E segments of the foreign exchange market, is expected to exert more pressure on the naira exchange rate.

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N4.16 billion unpaid lottery revenue recovered by EFCC

The EFCC has made a recovery of the sum of N4.16 billion for the government from lottery companies.

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Western Lotto

The Economic and Financial Crimes Commission (EFCC) has announced that it recovered over N4.16 billion for the government from lottery companies which they had refused to remit.

This was disclosed by the Acting Chairman. Mohammed Umar Abbah on Thursday evening, at the EFCC Headquarters during a meeting with Williams Alo of the Ministerial Task Force for recovery of unpaid revenues from lottery businesses.

The EFCC acting chairman said that the lottery companies were not forthcoming with remitting the revenue which had forced the anti-graft agency to intervene.

“We mapped out strategies which resulted in the recovery of over N1.16 billion from lottery companies, operating in Abuja with over N3 billion from their counterparts, operating in Lagos State,” he said.

He added that the EFCC would continue with its cooperation with the Federal Government to ensure lottery companies owing the Federal Government are made to cough out revenues they owe the government, which has already been handed over to the lottery trust fund.

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“Let me acknowledge the efforts of this Commission for the assistance it has rendered not only to the Federal Government of Nigeria but specifically to the lottery industry in Nigeria. It is in our record that the EFCC has assisted the lottery business in no small way, because a lot of recoveries have been made for us by the EFCC and the money recovered has always been handed over to the lottery trust fund,” Mr. Alo said.

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Presidency denies building rail line from Nigeria to Niger Republic

The Federal Government has denied plans to construct a rail line stretching from the country into the Niger Republic.

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Fraud, FG

The Presidency has disclosed that the Federal Government is not constructing a rail line from Nigeria linking Kano-Dutse-Maradi into the Niger Republic, as it will only stop at the designated border point.

This follows the public outcry that greeted the Federal Government’s announcement of the rail project.

The disclosure was made by the Senior Special Assistant to the President on Media and Publicity, Garba Shehu, through a thread of tweets on his official Twitter handle on Thursday, September 24, 2020.

He revealed that, based on the agreement reached between Nigeria and Niger in 2015 for the Kano-Katsina-Maradi corridor masterplan, the 2 countries agreed to build a rail line to the border town of Maradi.

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In his statement, Garba Shehu said, “Nigeria isn’t building rail line into Niger, but only to the designated Border point. An agreement between Nigeria and Niger in 2015, coordinated by the Nigeria-Niger Joint Commission for Cooperation has a plan for ‘Kano-Katsina-Maradi Corridor Master Plan, (K2M)’ as it is called.

“Going by this, the two nations would each build a rail track to meet at the border town of Maradi. Nigerian delegates to that meeting comprised officials from the Ministry of Foreign Affairs, National Boundaries Commission, Federal Ministry of Industry, Trade & Investment, Ministry of Agriculture and Rural Development, Water Resources as well as those of Kano & Katsina states.”

Going further he said, “The objective of the rail is the harnessing of raw materials, mineral resources, and agricultural produce. When completed, it will serve domestic industries, and play the role of a viable transportation backbone to the West African subregion, starting with the neighboring Niger Republic, for their export and import logistic chain.”

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Nairametrics had earlier reported that the Minister for Transportation, Rotimi Amaechi, after the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari, announced the approval of the total sum of about $1.9 billion, for the rail line contract and development of Kano-Katsina-Jibia that will terminate at Maradi rail line in the Niger Republic.

According to a media aide to the president, Ajuri Ngelale, the rail line is expected to connect the 3 states of Kano, Katsina, and Jigawa. It moves from Kano to Dambata, Kazaure, Daura, Mashi, Katsina, and terminating in Maradi, Niger Republic.

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