Nigerian energy tycoon, Femi Otadela, has just made a strategic business move. The executive chairman of Geregu Power, PLC, just bought a considerable stake in Dangote Cement, the manufacturing company owned by Africa’s richest man, Aliko Dangote.
But what are his motives? Why did he take so long before buying shares in one of Dangote’s companies? According to Nairametrics, the billionaire investor and energy tycoon bought these shares for two reasons. First, for financial reasons, and second, for strategic reasons.
It is undeniable that Dangote Cement is a dominant player in the African cement market and has enjoyed strong financial performance in recent years. Its stock price has appreciated significantly, making it an attractive investment.
Moreover, Dangote Cement has a strong track record of paying dividends to shareholders, exceeding N2.1 trillion in recent years. Otedola may be attracted to the consistent income stream this provides. As of January 22, 2024, Dangote Cement has a dividend yield of approximately 6.9%, which is higher than the average for the Nigerian stock market. Dangote Cement typically pays dividends twice per year, once in April and once in October. While the company does not have a formal dividend policy, it has a history of distributing a significant portion of its profits to shareholders.
Otedola has stated that he sees Dangote Cement's success as crucial to Nigeria's economic growth and development. Investing in the company is a way to align his financial interests with this vision. As a matter of fact, Dangote Cement's plans for expansion in Africa and its focus on sustainable business practices could be a further draw for Otedola.
The strategic reasons are numerous. First, Otadela made this move to diversify his portfolio. Indeed, owning shares in Dangote Cement would diversify Otedola's portfolio, which currently focuses on energy and financial services. This could reduce risk and provide long-term wealth preservation.
Second, investing in Dangote Cement could be a way for Otedola to build closer ties with Aliko Dangote, Africa's richest man. This could lead to future business opportunities or collaborations.Â
Third, and perhaps the most important of all strategic decisions, is his ability to influence the company’s direction. As a major shareholder, Otedola may have some influence over the company's operations and decision-making. This could be beneficial for both his financial interests and his vision for the Nigerian economy.
Otadela’s public statements have emphasized his confidence in Dangote Cement's potential and its positive impact on Nigeria, but individual financial considerations must also be playing a role. Ultimately, only Otedola himself knows for sure why he is buying Dangote Cement shares. However, the potential financial and strategic benefits are clear, making it a seemingly well-calculated move for a savvy businessman like him.