This week, Nigeria and West Africa became captive audience to the prowess of one man who built the largest and most expensive factory, which will have the most significant impact on Nigeria’s economy.
That man is Aliko Dangote, who I regard as the new owner of Nigeria.
How can one man own a country, you may ask.
He owns Nigeria because Nigeria’s economy, which has been steadily flowing through his arms, is now firmly in his pocket.
The presence of the Presidents of five West African nations at the opening of the Dangote Petroleum Refinery in Lagos is a clear testimony to the power in the hands of Africa’s richest man.
The $20 billion Dangote Petroleum Refinery is not just the largest in Nigeria and Africa, it is the biggest of its type anywhere in the world and it will produce 650,000 barrels a day, more than the four government-owned refineries that have been comatose for years.
It is perhaps the single largest investment in Nigeria’s history.
Dangote has put together a refinery that will rule the Nigerian economy for years to come, making him the most powerful man in Nigeria, if not West Africa.
He becomes the president without the title, the one who controls the economy, if not the politics.
With his controlling stakes in cement, sugar and other critical products, Nigeria has folded into the arms of one company owned by one man, thereby creating a vast monopoly.
The failure of governance is responsible for Dangote’s control of the economy.
The decapitation of pre-existing refineries, with a combined capacity of 450,000 barrels per day, has meant that it would rely entirely on expensive imports, creating new shady careers and billionaires who fed on government subsidies.
Nigeria has required billions of dollars annually to subsidize the importation of finished petroleum products, even when foreign exchange reserves have been shrinking.
According to the Central Bank of Nigeria, the cost of importing petroleum products jumped from about $8.4 billion in 2017 to $23.3 billion by the end of 2022.
The challenging environment was created through a lack of vision and energy strategy, poor planning, operational inefficiencies and stratospheric corruption.
Corruption is the evil that keeps eating at Nigeria’s soul.
Transparency International rankings over the years illustrate how corruption cripples Nigeria’s economy and national development.
In 2021, Nigeria was ranked 154 out of 180 countries, a deterioration from even a bad showing of 144 in 2018.
Dangote Refinery will hold too much power over consumers and the Nigerian economy, although the company will create value for Nigeria where the government has failed to plan
Over the years, bureaucrats and dirty businessmen have figured out a way to bleed the government-owned refineries to death, and rip the nation off on imported products, an opening for someone like Dangote who already knew how to control core sectors of the economy.
No doubt, having a functioning refinery at the capacity of Dangote refinery is good news, not just for Nigeria but for the sub-region.
That is not the point of this article.
It is that someone with monopolistic tendencies would wield too much power and ensure that competition is stifled.
In the end, that will be bad for Nigeria.
Dangote Refinery will hold too much power over consumers and the Nigerian economy, although the company will create value for Nigeria where the government has failed to plan.
Nations are breaking up big companies rather than create more. By their nature, “too big to fail” companies end up suffocating competition, innovation and the creation of new opportunities.
In America, the antitrust law does exactly that – to push back against the powerful and well-financed entrepreneurs and companies.
Currently, the US antitrust law is arrayed against big tech, in an attempt to break companies like Google, Facebook, Apple and Microsoft, which have become too big and monopolistic in tendencies.
My argument here may sound foreign to some but the evidence is already there that there will be price manipulation and tax revenues from the refinery may be in droplets.
Think about the cement industry in Nigeria.
Through mergers and acquisitions, Dangote Cement has emerged as the leader, but the price of the most important product in building and construction is controlled by Dangote Cement.
With a near 65% market share, Dangote Cement has been ripping Nigerians off. A Bloomberg Intelligence report showed that while the average global cement profit (EBITDA) margins were 17.2% in 2015, Dangote Cement made 42.3%.
Nigerians are paying far more than other nations for cement, although it has become a national pride that Nigeria is now self-sufficient, thanks to Dangote.
The rip-off doesn’t stop there, as Dangote has been taken advantage of his influence over government leaders.
Dangote Cement pays next to nothing in taxes. Between 2010 and 2015, it paid just one percent in taxes.
Seeing Dangote’s moves, the Jonathan administration initiated reforms to the pioneer status law which Dangote Cement had been abusing, as it changed the definition of pioneer industries and phased out cement out of the scheme.
Owing to its power and influence, Dangote Cement still pays peanuts compared to the profit that company has over a critical sector.
We know Dangote’s refinery will solve major problems for Nigeria, removing the current FOREX woes, while reducing import dependency and stimulating economic growth.
There is no denying the benefits of a local refinery, whether public or private. Nigeria needs it so badly.
Energy security is assured. The refinery will reduce the country’s dependence on imported petroleum products.
The refinery’s operations will generate employment opportunities, both directly and indirectly.
It will create jobs for skilled workers and support ancillary industries such as transportation, logistics, and hospitality.
There will be conservation of foreign exchange. Since refined oil importation contributes the largest share to Nigeria’s foreign spend, substantial savings in foreign exchange reserves for the country is guaranteed.
The presence of a large-scale refinery also has a tendency to stimulate the growth of downstream industries, such as petrochemicals, plastics, and manufacturing, which can benefit from a stable and affordable supply of refined petroleum products, leading to increased industrial activity and investment in related sectors.
Those benefits are bound to be delivered.
But it may come at a significant cost, and that cost is what most Nigerians are not paying attention to in the joy of celebration of the refinery.
Apart from high pricing similar to what obtains in the cement and sugar industries that are controlled by Dangote, it is not difficult to imagine that Nigeria’s oil, while abundant in supply, may cost more than in other countries.
If Dangote will be the only Sherriff in town, what will stop him from dictating the price of oil products?
Another concern will be how he will use the extremely powerful position of being in control of a strategic product that affects the daily lives of all Nigerians.
Although Dangote was rich, he was not that rich until he veered into politics under the administration of Olusegun Obasanjo. With the Obasanjo campaign out of funds for his re-election bid, he patronized Dangote, who pumped money into the election.
There is much to unravel about how Dangote’s connection to top politicians and government officials has been used to sway policy decisions
When Obasanjo won, he carelessly delivered economic advantages and opportunities to Dangote.
The Governor of Kaduna State, Nasir El-Rufai described in his 2013 book, The Accidental Public Servant, the making of Dangote:
“Obasanjo had to resort to raising money from other sources and that was how Aliko Dangote came into prominence in the government. From 1999 to 2003, nobody had heard of Dangote having anything to do with the federal government in any significant way. ”
Successive administrations have been closely aligned with Africa’s richest man, including the Buhari government.
Senior officials are often at Dangote company events in Nigeria and other African nations.
Central Bank Governor, Godwin Emefiele, went as far as advising “more Nigerians need to think like Dangote” while visiting the refinery, saying the government was all-in with support to the businessman.
There is much to unravel about how Dangote’s connection to top politicians and government officials has been used to sway policy decisions.
Reuters, a foreign news organisation, reported that Dangote’s companies received exclusive foreign currency allocations from the Central Bank while the Nigerian economy suffered dollar shortages.
It wrote: “As Nigeria grapples with a foreign exchange crisis, one person stands out in the scramble to obtain hard currency: Aliko Dangote, Africa’s richest man.”
With more power now in Dangote’s hands, Nigerians should beware. Power corrupts.