Dangote Cement eyes $22m forex surplus with aggressive export drive

Africa’s largest cement manufacturer is ramping up its exports of the building material, which is a key ingredient in its forex neutralisation strategy across the continent. Dangote Cement is targeting a monthly forex surplus of $22m, a top executive of the company told The Africa Report.

In an interview in Lagos on Friday, Group Chief Finance Officer Gbenga Fapohunda said the fallout from the recent currency devaluation in Nigeria – the company’s home and biggest market – was “an eye-opener for us”.

“What we decided as a business is that we’re going to pursue a forex neutralisation strategy. What it means is that everything we consume from an opex (operating expense) perspective, we must generate [in] dollars,” he said.

The currency devaluations in 2023 and 2024 that saw the naira lose about 70% of its value against the dollar resulted in massive forex losses across sectorsand hurt company profits – including that of Dangote Cement.

The government devalued the currency and removed the fuel subsidy, leaving huge amounts of money in the hands of the government. So, they just devoted that into infrastructure, mainly roads, schools and hospitals

Fapohunda says that about one and a half years ago, the company had a $22m gap per month, “meaning that for us to produce our products, we needed to source $22m”.

He points out that 40%-50% of the company’s operating costs are denominated in dollars, saying that the forex deficit was cleared five months ago. “Now, we’re at a positive of $1m. We’re trying to get it to $22m positive,” he says.

He says the shift to a forex surplus has strengthened the company’s operational cash flow, adding that the next stage will be to focus on capital expenditure.

‘Aggressive export strategy’

The Lagos-listed cement producer embarked on “an aggressive export strategy” to plug the forex gap, the CFO says, adding that the company’s exports have jumped by 200% over the past five years.

Fapohunda says the company is servicing the export markets from its excess capacity without compromising on local demand.

Its exports of cement and clinker from Nigeria grew by 69.1% in 2024 to a record 1.2Mt, representing a five-year compound annual growth rate (CAGR) of 36.5%, according to data from the company.

Dangote Cement currently exports clinker from Nigeria through port terminals in Lagos and Rivers states to Cameroon and Ghana, while cement is exported to Niger and Togo by road.

These strategic, capital-efficient investments reflect our commitment to capturing growth opportunities in high-potential African markets

The company, which now has operations in 11 African countries with an installed capacity of 55 million tonnes per annum (Mta), exports from Congo to Cameroon, the Democratic Republic of the Congo and the Central African Republic, as well as from Senegal to markets including Mali and Gambia.

“Our target is to reach 7Mt of both cement and clinker exports,” Arvind Pathak, its group managing director and CEO, told the investor community at the Nigerian bourse last Wednesday. “Our vision is for Africa to be cement and clinker self-sufficient.”

Sub-Saharan Africa will soon be the best cement market in the world, with a projected growth of over 77% by 2030, according to the UK-based On Field Investment Research.

Cost-cutting measures

The CFO says the company has significantly reduced its costs in recent years by taking several measures, such as increasing the adoption of alternative fuels to power its factories and trucks.

“For example, instead of using gas that is denominated in US dollars, we started using more alternative fuel,” he says, adding that the usage of alternative fuels has risen to about 40% in South Africa, Senegal and Zambia.

Dangote Cement says its deployment of over 3,000 compressed natural gas-powered trucks has cut its fuel cost by 60%, with plans to stop using diesel in Nigeria by 2026.

The company boasts 7,000 trucks for the transportation of cement, according to Fapohunda.

He describes the operations in Nigeria as “well-dispersed”, with four cement plants in Kogi, Ogun, Benue and Edo states capable of producing 35.25Mta.

“Most of our plants can use gas, low pour fuel oil, coal and alternative fuel,” he says.

“Three, four years ago, gas was the cheapest source of powering our plants. Today, it has moved to alternative fuel and others.”

Going into the next couple of years, we see it continue to grow because these projects are going to be done over three to four years

Several factors, including the cost of production, demand and supply, as well as inflation, interest and exchange rates, determine the selling price of cement, according to Fapohunda.

“We are the lowest-cost producer in Nigeria. So that’s why you see our EBITDA (earnings before interest, taxes, depreciation and amortisation) being quite healthy because we’ve attacked our costs aggressively,” he says.

Expansion projects underway

Dangote Cement aims to expand its installed production capacity to 66.4Mta by 2030, with the growth to be driven by a mix of greenfield and brownfield projects in Nigeria, Cote d’Ivoire, Cameroon, Senegal, South Africa, and Ethiopia.

The company says it has commissioned the first phase (1.5Mta) of its 3Mta facility in Cote d’Ivoire, while the 6Mta Itori Plant under construction in Nigeria is expected to come on stream in 2027.

It recently announced a $400m investment to double its production capacity in Ethiopia to 5Mta.

“These strategic, capital-efficient investments reflect our commitment to capturing growth opportunities in high-potential African markets,” CEO Pathak said, adding that the company has committed about $10bn in capital investmentsacross the continent over the past 15 years.

Fapohunda says the company’s revenue has grown by about 23% CAGR over the last 14 years.

“With these additional capacities come additional EBITDA, profitability and revenue,” he says. “We had 20% EBITDA growth over the last 14 years. In terms of profit, 12%; volume, about 10% growth, and dividend, about 23% growth over the last 14 years.”

Dividend policy and demand outlook

On the company’s dividend policy, he says: “The way we look at it, basically, we do four things. We first invest in the business. We invest in the business. We invest in the business. We send the excess cash to our shareholders either by way of dividend or by way of share buyback.”

Dangote Cement’s payout ratio is roughly between 80% and 120%, according to Fapohunda, who says: “Our shareholders are very important to us.”

Cement demand, considered a bellwether for the health of the economy, has picked up in recent years largely on the back of government infrastructure projects.

“The government devalued the currency and removed the fuel subsidy, leaving huge amounts of money in the hands of the government. So, they just devoted that into infrastructure, mainly roads, schools and hospitals,” the CFO says.

With the construction of several roads, including the Lagos-Calabar Coastal Highway, which is purely concrete, the demand for cement has increased significantly, he says.

“Going into the next couple of years, we see it continue to grow because these projects are going to be done over three to four years,” Fapohunda says. “We expect the market to have grown by the end of the year by about 8%-10%.” (The Africa Report)