How what makes you rich can also make you poor-the Aliko Dangote story

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Dangote Cement has had a turbulent time on the Nigeria Stock Exchange (NSE). Within a year, the company’s stock has touched a high of N250 per share and also a low price of N153 per share as at Friday, February 20, 2015.

You may not appreciate this change in the fortunes of Dangote Cement until you value the monetary implications of these steep changes in the price of the company’s shares.

With about 17 billion shares in issue, at the year high price of N250 per share, Dangote Cement was worth N4.26 trillion almost equivalent of Nigeria’s annual budget.

As at its Friday, February 20, 2015 when it closed at a price of N153 per share, Dangote Cement was worth just N2.61 trillion, which is a drop of N1.61 trillion or 39% from its high price. This steep drop occurred within six months as many foreign investors left the Nigerian capital market as crude oil prices dropped and the Nigerian naira also dropped in value.

The fall in market value of Dangote Cement was even steeper when looked at in terms of dollars. At N4.26 trillion, when the official rate of the Naira to the dollar was about N155, Dangote Cement was worth $27 billion. This however dropped to just $13 billion, a loss of $14 billion within 12 months.
This is largely because besides the drop in its share price, the official rate of the Naira has also dropped from N155 to the $ to N198 to the $ leading to a 52% drop in the value of Dangote Cement in dollar terms.

Aliko Dangote is said to be the beneficial owner of about 80% of Dangote Cement Plc. This means that about 80% of this fall in the company’s value hit his fortunes directly.

Not surprisingly when Forbes released its list of the World’s richest in March 2015, Aliko Dangote topped the list of billionaires whose fortune dropped the most. Forbes estimated that Dangote fortune was down by $10.8 billion within a year. His fortune had dropped from an estimated $25 billion the previous year to $14.7 billion.

Since the ranking in March 2015, Dangote Cement share price has improved to close at N180 per share as at May 28, 2015. The real time ranking of Aliko Dangote on the Forbes rich list has also improved to $18 billion on the same date from the $14.7 billion in March 2015.

Aliko Dangote story has shown clearly that what makes you rich can also make you poor. It must however be noted that the market valuation of Dangote Cement in no way affects the viability of the company.

It is still Africa’s biggest cement producer and the dominant cement seller in the Nigerian market controlling about 70% of the market. The company’s current valuation may fluctuate without affecting its viability.