I think I educated today. Let me share the comments and my responses. It may help some young people going into finance. I write as an ex-banker (a really good one) and founder/chairman of a US-based investment banking institution which invests $$millions across the globe yearly.

QUESTION on if billionaires care when their assets drop in value: “I sometimes wonder if billionaires care about these ratings. Once you make a few billion dollars, what is it that one billionaire can do that you can’t? “

My RESPONSE: Does ranking matter? I respond YES, the higher you’re ranked, the easier banks see you as a good risk for loans. Consider this brief which I will write if I am asked to raise money for Dangote:

“This client is Africa’s richest man and the most dominant businessman in sub-Saharan Africa. For more than 20 years, Forbes, Bloomberg, Fortune, etc have recognized the excellence he has demonstrated in his enterprises. He plans to venture into Sun-Direct Electricity, tapping the inner layers of the sun to power every part of Africa. This has never been done before and it offers a massive opportunity to fix the energy poverty problem in Africa.

Our client is looking for $50billion. Four banks have already committed $35billion and we’re working to close the balance of $15billion. As Africa’s richest man with a durable position on all the major wealth rankings, we model that his risk is well mitigated.

More so, he owns 85% of Dangote Cement and a chunk of other entities within Dangote Group which pay an excess of $1 billion in dividend yearly, meaning that his capacity to service this debt is well contained. Kindly review the attached investment brief and let me read you in three days.

Ndubuisi, Tekedia Capital”

1/2 (I will share a sample of an investment brief later. We have one in Tekedia Startup Masterclass as a sample though) Source

2/2 . QUESTION: “…There are probably very rich people that only farm. I am assuming banks won’t lend them money to launch a satcom business.”

MY RESPONSE: “There are probably very rich people that only farm. I am assuming banks won’t lend them money to launch a satcom business.” If you are rich and need money from a bank, most times, they do not care what you plan to do with that money provided they are sure you will pay back. Due diligence happens extensively for the poor folks.

What do they look to be sure you can pay back? Easy. If you run a farm business (Farm Ltd) and generate $500m in profit and the business is valued at $3B, and want to go into satcom business and need $500m, you will get your funds.

Why? I will ask for 50% of the farm business equity as a collateral and power of attorney for 50-80% all dividends to be paid for the debts. Magically, there is no risk to giving you $500 million since I have secured the bottom. If the shares  of Farm Ltd begin to drop, by the time it drops from $3b to $1b, I will sell to get my money back.

Very rich people do not need to write head-cracking business plans as WE THE PEOPLE do; you actually beg them to borrow because they have limited risks since there are assets which mitigate the risk.

Comment on Feed

Comment 1: But individual person is not the same as a corporate person that is assessed for borrowing purposes. Billionaires use trusts and holding companies to hold shares of companies. Dangote’s resume may get huge loans but in reality it is his companies claims against society that the banks will fund. It will be easier to list the entity that is borrowing.

My Response: Of course, in context, it is Dangote company that borrows. Not sure Dangote as a person needs to borrow money. Borrow for what? Milk or indomie. We’re discussing his company. Yet, if you own 85% of a company, banks will see you as being the company.

Comment 2: I suppose this speaks more to credible counter parties and the reliability of their cash flows backed by assets accumulated overtime from retained earnings. The challenge is that earnings expectations are usually missed and could lead to downgrade of borrowing capacity.

My Response: VERY RICH PEOPLE, not just rich people, meet those yardsticks of “reliability of their cash flows backed by assets accumulated overtime from retained earnings”. The portfolio is designed in such a way that if one side struggles, what is causing the struggles will help the other side.

Let me send my words of support(!) to Aliko Dangote and other billionaires as many of them become “poorer”, following the floating, swimming or flying of the Naira: Nigeria giveth, Nigeria taketh; it is all good!  But truth be told, if Nigeria can isolate the vagaries of exchange rate in business, the nation will rise.

“Aliko Dangote, the Chairman of Dangote Group, a leading conglomerate in Africa, is no longer the richest man in Africa, according to Forbes. In a billionaire list updated recently by the Magazine, Dangote lost his long-held position to South African billionaire Johann Rupert, after the wealth of the Nigerian plummeted by a whopping $3.4 billion in a day, following the decision of the Nigerian government to float the naira, the nation’s currency.”

Comment On Feed

Comment 1: I sometimes wonder if billionaires care about these ratings. Once you make a few billion dollars, what is it that one billionaire can do that you can’t?

My Response: Provided they put those in their bios, I will assume they care. There are phases of wealth nonetheless. And yes, the more you are ranked, the easier banks see you as a good risk to give loans. Consider this brief which I will write if I am asked as a banker to raise money for Dangote: 

“This client is Africa’s richest man and the most dominant businessman in sub-Saharan Africa. For more than 20 years, Forbes, Bloomberg, Fortune, and other leading brands have recognized the excellence he has demonstrated in his enterprises. He plans to venture into Sun-Direct Electricity, tapping the inner layers of the sun to power every part of Africa. This  has never been done before and it offers a massive opportunity to fix the energy poverty problem in Africa. 

Our client is looking for $50 billion. Four banks have already committed $35billion and we’re working to close the balance of $15 billion. As Africa’s richest man with a durable position on all the major wealth rankings, we model that his risk is well mitigated. More so, he owns 85% of Dangote Cement and a chunk of other entities within Dangote Group which pay an excess of  $1 billion in dividend yearly meaning that his capacity to service this debt is well contained. Kindly review the attached  investment brief and let me read you in three days -Ndubuisi Ekekwe, Tekedia Capital”

Comment 1R: Ndubuisi, this man. I am just having a laugh here. The funny thing is that it’s actually how the framing always goes, it’s a great risk to lend big amount of money to a poor man, no matter how grand his proposed idea is…

Comment 2: Ndubuisi Ekekwe you earlier said the fortune of the naira will be determined not by CBN monetary policies but by factories and warehouses, and now you are still saying “if Nigeria can isolate the vagaries of exchange rate in business, the nation will rise”. I find it hard to really comprehend your position with this floating of the naira.

My Response: Whether you use factories, warehouses, or financial engineering, the destination is one place: ” isolate the vagaries of exchange rate in business,” You already know how we can get there via production, I do not need to repeat it every day. But the point is clear: you need to stabilize the exchange rate, no matter how you plan to do it. There is nothing I wrote here that should confuse or complicate comprehension. 

Comment 2R: I sincerely understand your point that production is the panacea to redeeming the old glory of the naira. However, one should not dismiss the fact that a good financial engineering is also needed that will give investors confidence and help production in the long term.
There’s been so much arbitrage opportunities with the fixed exchange rate, which should be eliminated and also to give investors confidence that they can repatriate their $$$ when they invest in our economy.
We won’t start building factories over night. It’s a long a and painful process. In the short term, we need good monetary policies.

My Response:  “I sincerely understand your point that production is the panacea to redeeming the old glory of the naira” – great that it is clear now

“However, one should not dismiss the fact that a good financial engineering is also needed” – I have NEVER said that we do not need it. If that is the case, we will close CBN. My point is that besides it, you need to make things since financial engineering since 1985 has NEVER worked for Nigeria. It works, then it fades. Simply, we need to have a long-term manufacturing policy (manufacturing here includes service, making things physical and digital)

Nice comments across the ecosystems on the response I left on the Dangote billionaire article: “I like the investment brief introduction, could you share a sample of an investment brief?” Let me respond generally that I will find a way to “declassify” the sample we use in Tekedia Startup Masterclass, and when done, I will share here. But note that I own a banking institution (Tekedia Capital)  in America, and we help organizations raise $$millions all the time. So, that entry was not a social media response; see it as a banker and expert whose akara, moi moi, nkwobi, etc depend on it.

Aliko Dangote, the Chairman of Dangote Group, a leading conglomerate in Africa, is no longer the richest man in Africa, according to Forbes.

In a billionaire list updated recently by the Magazine, Dangote lost his long-held position to South African billionaire Johann Rupert, after the wealth of the Nigerian plummeted by a whopping $3.4 billion in a day, following the decision of the Nigerian government to float the naira, the nation’s currency.

Rupert’s staggering $12 billion fortune saw him climbing to the first spot, usurping Dangote’s 10-year reign. The Nigerian serial entrepreneur has occupied the throne since 2013.

But Billionaire Africa noted that Dangote remains Africa’s richest man judging by Bloomberg’s Billionaire Index, which puts his fortune above Rupert’s. While Forbes estimates Dangote’s fortune at $10.8 billion, Bloomberg places his net worth at $16.8 billion, positioning him as the wealthiest individual on the African continent. Meanwhile, Johann Rupert’s net worth remains steady at $13.3 billion.

Dangote’s fortune has faced storms since 2014, when he reached an unprecedented financial milestone with a groundbreaking $20 billion mark, making him the first African entrepreneur to reach the threshold.

The billionaire’s fortune has been in decline over the past decade, according to Forbes records. Starting at $25 billion in 2014, his fortune gradually declined to $14.2 billion, largely influenced by currency devaluations that have negatively impacted the wealth, income, and purchasing power of Nigerians, per the record.

The latest decline to Dangote’s fortune follows Wednesday’s announcement by the Central Bank of Nigeria that the nation’s forex market has been fully deregulated. The naira depreciated as much as N750 per dollar – a major drop from the N4669 per dollar traded in the Investor and Exporter window previously. The development wiped off enormous fortune from the coffers of Nigerian billionaires, not only Dangote.

The floatation of the naira had a severe impact on his assets, including his substantial 86 percent stake in Dangote Cement, his holdings in Dangote Sugar Refinery, and his private interests in Dangote Industries, per Billionaire.

However, the floatation saw other Nigerian billionaires, including industrialist Abdul Samad Rabiu, and telecom and oil mogul Mike Adenuga lose huge fortunes.

Rabiu’s net worth experienced a $2 billion decrease, falling from $8.2 billion to $6.2 billion, causing him to lose his position as the fourth-richest person in Africa to Egyptian billionaire Nassef Sawiris, who currently boasts a net worth of $6.9 billion according to Forbes.

With the deregulation of the Nigerian forex market, which means that market forces will hence determine the value of the naira against the US dollar, Dangote and other Nigerian billionaires will likely see their fortune plunge further.