Dangote diversifies wealth outside Nigeria

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Aliko Dangote decides to open a US office to diversify investments

Aliko Dangote said he will open an office in New York, United States, to help diversify his investments and avoid the risk of currency fluctuations in Nigeria.
“In Africa, you know we have issues of devaluation, so we want to really preserve some of the family’s wealth,” Dangote told Bloomberg TV’s David Rubenstein Show.

Dangote’s announcement to diversify his wealth to the United States had becomealmost indispensable following the African Billonaire’s the collective value shareholding in his companies reduced by a whooping N724.3 billion in 2019, dropping him to the 95th richest person in the world. Economic uncertainty in Nigeria and across Africa, as well as fluctuations in the naira, prompted this move.

Bloomberg Billionaire Index revealed that the net worth of the Nigerian businessman declined from $17.8 billion at the beginning of the quarter, to $16.4 as at, the 31st of March 2021.

The billionaire who is the founder of Dangote Industries Limited, Africa’s most diversified manufacturing conglomerate, has seen his wealth decline by about 7.9% this year following the fall in the shares of his listed businesses.

Diversification is an investment strategy aimed at managing risk by spreading your money across a variety of investments such as stocks, bonds, real estate, and cash alternatives. Diversification does not however guarantee a profit or protect against loss.

A member of the Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC), Prof. Adeola Adenikinju, warned that the naira faces a big challenge ahead unless certain conditions in the economy challenging the local currency’s stability are addressed.
In his personal statement to the CBN, the Research Professor at the Centre for Econometrics and Allied Research, University of Ibadan, Prof. Adenikinju, said the fall in foreign reserves and deterioration of current account balances are red signals pointing to a difficult time ahead for the naira.
The naira depreciated at the Investors’ & Exporters’ (I&E) windows by 0.49 percent to close at N363.49/$ from N361.7/$ but the local currency has stayed around N306.95/$ at the official market. Gross external reserves declined further by 1.16 percent to $39.24 billion from $39.7 billion at the beginning of the month. The sustained decline in external reserves led to a reduction in Nigeria’s import cover from 9.88 months.

Adenikinju explained that although the foreign exchange rate markets remain relatively stable at both the Bureau De Change and the Investors’ & Exporters’ (I&E) windows, the weak performance of the current account balances, fall in foreign reserves and the small margin between oil price and the benchmark price for oil, implies that there could be increasing pressure on the naira in the medium term if the existing conditions subsists.(thenatioonline.net)

The pressures from the underperforming Nigerian capital market influenced by a bad Nigerian economy poses serious risks to assets loss of the Africa’s richest. Hence, the need to protect his wealth.

The COO of the Enterprise Ecosystem Support, Clement Davids shares his thoughts on this issue;

“With so much institutional voids present in Nigeria some of which would include corruption, unfavorable business policies, unstable business ecosystem, high inflation, insecurities amongst others raises concerns for investors and reduces FDI to Nigeria.
One would imagine that someone like a Dangote who sits as the richest African man would be concerned about the Nigerian business climate and will look to secure his investment offshore.

In order to boost and attract more FDI to Nigeria, the government must constantly tackle these institutional voids. It must be able to assure investors of investment securities by tackling the high rate of inflation, providing security across its regions, and enacting policies that will help businesses grow rather than stifle them out”.

African companies can learn from Dangote’s diversification and globalization strategy using the Dangote cement company as an example.

“The Dangote Group is the largest industrial conglomerate in West Africa and one of the leading diversified business conglomerates in Africa. It employs in excess of 21,000 people. The product range and interests include cement, sugar, flour, salt, pasta, beverages, and real estate, with new projects in development in the oil and natural gas, telecommunications, fertilizer, and steel” Gabriel Domale . (gabrieldomale.com)

Relocating assets to a more stable economy was a strategic move to prevent assets decline.





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