By Victor Ogiemwonyi
In the last few days, Oil and its politics, has dominated discussions in Nigeria.
The Dangote Group, NNPC and NMDPA, its Regulator, has been engaging each other in contentious exchanges, that has resulted in some interesting revelations.
Dangote revealed that the allocated 20% Ownership in Dangote Refinery to the NNPC,
has not been paid for, and has therefore reduced NNPC shareholding to just 7%.
This has drawn reaction from NNPC, who is now just telling us, they review their investment decisions from time to time, how that directly addresses, the issue of the 20% proposed ownership that has now changed, is yet to be known.
The NMPDPA, Dangote Refinery’s Regulator, on the other hand, has addressed a press conference to say that the Dangote Refinery, has not been Licensed fully and it’s Diesel product, was of inferior quality, they also accuse Dangote of wanting to be a monopolist, who wants to compromise Nigeria’s Energy security…this specific claim has drawn the most comments.
What this , obviously, a
de- marketing ploy, meant to achieve , is not exactly clear.
No matter what you make of it, it was in bad taste, and some have said, it is tantamount to economic sabotage, to be advocating petroleum products, importation at this time.
The claims that Dangote has Monopolistic tendencies, that is often mouthed, but without proof, has been so overstated that people tend to believe it on face value, without examining it. When you ask those who push this monopoly claim. They will tell you Dangote gets Government favors, he gets Tax holidays and concessions. When you ask them, to tell us, whether those who compete with him, have been denied this same Tax holidays/ concessions, etc …. they can not say.
It is strange that those who make these claims, do not know that almost all the big companies doing business in Nigeria, including local and foreign ones, all use this tax holidays, waivers and concessions, if they qualify. It will be interesting to see a list of all the companies that have used these Tax holidays, Waivers and concessions in the past.
The helmsman of the Dangote Group has been in business this past 40years. You can not say he has found unusual favors with all the Governments of the day, military and civilian in this last 40 years. Those close to him say, he is a very hard working man and very competitive, and wants to have the largest market share of any business he is in. This is not a crime, there is very significant difference between a dominant player and a monopolist.
To the best of my knowledge, Nigeria is open for business to anyone. Take his dominance of the Cement Industry in Nigeria, for instance, he has earned the market share he controls. This is, because, as the largest producer of cement, in Nigeria, with the most capacity, he is the dominant player. That does not make him a monopolist. Ask BUA the next largest producer of Cement in Nigeria, he sells everything he produces, in-fact, there are, at least, 4 more producers, and they all have market for their products. The top two producers are the latest to come to the industry. The oldest of the Cement producers,
The Lafarge/ Elephant Cement Group, has not been able to build the capacity, built by Dangote in 20 years, in their 50 plus years in Nigeria. By the way, is Dangote Cement, also a monopolist in Ethiopia, Tanzania and other African countries where he operates?
His foray into the Refinery business is a testament to a dogged fighter. No one remembers now, that he bidded for the Port Harcourt Refinery and won it, only to be cancelled by the then Administration, of president Yaradua … anyone seeing what has happened to the unending turnaround maintenance of the PH refinery in the last 20years without results, and the Billions of Dollars that have been sunk in, will agree, it was a mistake to have cancelled that concession. To prove that he has seen what opportunities there are in the business, he kept his dream alive, pouring $20billion into a New refinery, that took
7 years to build, in a hazardous Nigeria economic environment.
If he was in for just the quick money, he would not have bothered to do a brand new Refinery.
Let’s give honor to whom honor is due, Mr Aliko Dangote has been a force for good in Nigeria. He has been in the forefront of contributing his quota to developing Nigeria.
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No one remembers now, that Mr Dangote got into the cement business, when it was a pain point for Nigeria. Nigeria was spending a significant portion of its FX in importing Cement. It was also causing other problems, imported Cement , also sometimes clogged our Ports and create problems for other critical imports and exports… coming in and going out. In fact, increasing inefficiency at the Ports, and other consequential economic costs. He has now solved that problem, Nigeria today, export cement, and earn FX, from Cement, instead of spending FX to import Cement.
Petroleum product imports in recent years, has also become another pain point for Nigeria and a drain on our FX resources …. Some say over 50% of our FX earnings go back to import petroleum products.
We have all also experience the long petrol lines and attendant road congestion, when the NNPC sometimes, fail to properly measure, our petrol needs, or import too little, and there is scarcity. Sometimes, even import, bad fuel.
This shortages that occur from time to time, also have other hidden cost. When there is fuel shortage and it affects, all economic activities, and sometimes threatening security, there is then , an emergency, which requires emergency measures. This sometimes means, buying products at whatever price, to ensure swift importation and delivery. This extra cost is avoidable if you ask me. This, then leads to another cost, not so apparent cost, the cost of forward buying in anticipation of demand. to avoid the next scarcity. This is very costly, whether you pay cash forward or you do it with credit.
Given that the out-put of the Dangote Refinery is local production, the pay off to the sector is shorting of supply lead times, and energy security, with the potential to end fuel queues in Nigeria. This also eliminates forward buying , and also yielding major savings .
The Fx allocation to petroleum product imports , will be saved, and FX saved can go to other critical areas.
We have heard arguments that because Dangote is producing locally, he should sell his products cheaper and in Naira. What those advocating this do not know, is that Oil, is an international product, sold all over the world in FX. The same way, Dangote cannot also buy our oil in Naira.
Let’s be a little charitable and let Dangote be. Not only is he born into an aristocratic family of the Dantatas of Kano, he has worked hard enough and earned enough to take care of his next 2 generations. It will be foolhardy, If money alone, is his motivation.
He has worked hard to reduce some of our development pain points in Nigeria. The least we can do, is encourage him.
Victor Ogiemwonyi , is a retired Investment Banker and writes from Ikoyi, Lagos.