Uncertainty As Dangote’s Stocks Fall, Forces Behind It Revealed

The recent decline in stock prices of Dangote Group’s subsidiaries, including Dangote Sugar Refinery and NASCON Allied Industries, has been largely attributed to foreign exchange losses and the rejection of their merger proposal by the Securities and Exchange Commission (SEC).

Analysts point out that inflationary pressures and volatile forex conditions have exacerbated these challenges. The depreciation of the naira has increased the cost of importing raw materials, thereby squeezing profit margins. Between May and August 2024, Dangote Sugar Refinery’s stock dropped by 18.67%, from N45.00 to N36.60, due to supply chain disruptions and fluctuating sugar prices that negatively impacted its financial performance. Similarly, NASCON Allied Industries saw a 12.57% decline in its stock price, from N37.00 to N32.45, during the same period. However, Dangote Cement experienced a notable 41% growth in its share price, rising from N419 in May to N591 by early August.

In an official statement, NASCON announced that the proposed merger with Dangote Sugar Refinery and Dangote Rice Limited has been suspended following feedback from the SEC. The SEC expressed concerns regarding the non-operational status of Dangote Rice Limited, leading to the decision to halt the merger process.

Bisi Bakare, a leader of a shareholders’ advocacy group, noted that while Dangote Group’s subsidiaries are facing difficulties, they remain focused on growth and resilience. A financial analyst, Ariyo Olugbosun, highlighted that the SEC’s rejection of the merger was a significant factor contributing to the stock price fluctuations, in addition to the ongoing issues related to foreign exchange losses.