On Monday, Africa’s richest man lost $3.7 billion of his wealth as the Naira toppled on its first day of trading without a peg to the US dollar.
Africa’s richest man, Aliko Dangote fell 25 places on the Bloomberg Billionaires Index on Monday, as the Naira fell on its first day of trading without a peg to the US dollar.
Dangote’s fortune fell by $3.7 billion which consequently made him slide from the previous position, 46, to 71.
The drop can be attributed to the effect of Central Bank of Nigeria’s (CBN) new directive which has allowed the Naira to float freely after years of successive pegging to the United States dollar by the government and CBN governors. The bank had been using capital controls to restrain an outflow of dollars after the Naira plummeted in February 2015 due to a decrease in oil prices.
In this case, the exchange rate is going to be determined by the market forces of demand and supply. Trading on its first day using the new directives, the Naira traded at N281/$1 at the interbank market. The flotation also affected the Nigerian stock market, which recorded a loss of N164 billion. The market capitalization of the Nigerian Stock Exchange dropped to N9.881 trillion up from N10.045 trillion.
Dangote Cement Plc was among the big losers of the day, with the company losing about 2 percent in trading which translated to a decrease in Dangote’s wealth which is majorly derived from a 91 percent stake in the cement company. Last Friday, Dangote Cement’s stock closed at N183.81 per share but closed at N179.99 on Monday.
Dangote’s company is the biggest cement producer in Africa with a capacity of over 20 million metric tons per annum. Other than cement, Dangote Sugar Refinery is the largest Sugar producers in Africa and third in the world, producing an estimated 800 thousand tons of sugar annually. Dangote has expanded his reach beyond Nigeria, to West Africa, and across sub-Sahara with a major presence in Nigeria, Ghana, and Togo. At the beginning of the year, Forbes estimated his current worth to be $16.4 billion. He has been Africa’s richest person since 2013 after overtaking Mohammed Hussein Al Amoudi.
On realization that Nigerian homes over-relied on tomato products imports, even though the country was the 14th largest producer of tomatoes in the world, Dangote invested in a tomato factory in Kano. Unfortunately, due to the recent fruit shortage brought about by the fruit-eating moth (tomato leaf miner), the factory closed down as it could not get 1,200 tons a day needed for operations.
By Tuesday, things in the Nigerian stock market were looking up as the Naira appreciated to N10.1trn, translating to a gain for Dangote. While Dangote Cement Plc. closed its stock at N185 per share on Tuesday, the Bloomberg Billionaire Index indicated that the billionaire had gone down nine places from 71.
It is worth noting that even though Dangote’s wealth has been devalued, it is in regards to the US dollar which is the measurement of the index. The value of the Naira on the day of evaluation also affects Dangote’s ranking on the list. Translated back to Naira, however, the Nigerian billionaire’s wealth is barely scratched. It is expected that his ranking will improve over time as the Naira gains strength in the market in the coming months.