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From Cementing Poverty To Oiling Its Wheels ?

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President Bola Ahmad Tinubu

Hamisu Hadejia,PhD

Endowed with vast deposits of limestones, ‘why would Nigeria be spending millions of dollars importing cement from abroad?’. This was the question that agitated the mind of Nigeria’s former president Olusegun Obasanjo (OBJ) in the early 2000s, leading to the former president summoning the major cement importer at the time, Mr Aliko Dangote, to brainstorm on sorting out the puzzle.

A policy seeking to incentivise cement importers to start local cement manufacture, known as the backward integration policy (BIP), was consequently introduced in 2002, following the private conversations between OBJ and Dangote.

As a sectoral industrial policy, the BIP made the grant of cement import licenses conditional on cement importers demonstrating concrete commitment to set up local cement producing factories. The strategy was to phase out, before completely banning, cement importation when local factories could produce enough to replace imports—a strategy known in economics as ‘import substitution policy’.

Among other incentives, the BIP ensured the sales of foreign exchange (dollars) to cement entrepreneurs especially Dangote at the official rate. For example, in a Reuters report, Dangote was said to have secured $161 million at the official exchange rate (of between 197 to 199 NGN per 1 USD) from the Central Bank of Nigeria (CBN) between March and May 2016. If Dangote were to (and he could without any accountability) re-sell this $161 million foreign exchange award in the currency black market, he would have made a profit of $100 million (£68 million) without lifting a finger. Thus, effectively, what this means is that just in a couple of months, the Nigerian government had subsidized Dangote to the tune of $100 million US dollars with taxpayers’ money, under the guise of supporting ‘strategic’ businesses.

Not only that, VAT/custom duty waivers on imported cement making equipment, credit guarantees, and a cumulative tax holidays of seven years were granted to Dangote Cement Companies (DCC).

Government’s support to infant firms, industries or entrepreneurs is not a new phenomenon in nations’ industrialization processes. Economists such as Alexandre Hamilton (1757-1804), Friedrich List (1789-1846), and contemporary ones like Ha-Joon Chang and Eric Reinert, have documented evidence confirming that these kinds of supports or state-business relations were instrumental to the industrialization of almost all industrialized nations of Europe, North America, and East Asia. However, the state-business relations in Nigeria especially in the cement industry deserves some critical reflections and re-evaluations for social welfare considerations.

THE PROS OF THE BIP

Within a little over a decade, the BIP succeeded in replacing cement imports with local production in Nigeria leading to the complete ban on importation of cement in 2012. Hence, government officials and industry players have never failed to flaunt the BIP policy as a national feat all patriotic Nigerians should celebrate. The bases for this conclusion are three: One, the policy has made Nigeria self-sufficient in cement production; two, it has created jobs opportunities; three, it saves Nigeria foreign exchange which, at the peak of import in 2008, was $304 million. While these ‘successes’ have been belaboured time and again, Nigerians have been deliberately left in the dark as to the costs of these achievements, which include, but are not limited to, the disproportionately lavish state incentives to cement investors as adumbrated above.

THE CONS OF THE BIP

The ban on cement imports and the dominance of a single player in Dangote gave rise to a monopoly, now duopoly, in the cement industry. Latching on to the opportunity, Dangote has used every trick in the book to initially eliminate competition (e.g., the case of Clestus Ibeto), charge exorbitant prices, and pay the state less than its due in taxes. Any evidence for these claims? Yes, there are plenty! For a start, it is a fact that the Nigerian cement consumers now buy a 50kg bag of cement at almost $10 (official rate). This is outrageously higher than what obtains in other markets including in many African countries, to some of which Dangote merely exports the clinkers he processes in Nigeria using Nigeria’s limestones for final processing and sales in those countries at prices lower than he sells in Nigeria! In fact, compared to its price in Nigeria, a 50kg bag of cement costs lower in China ($2.96), Malaysia ($2.3), India ($3.84), Kenya ($5.56), Zambia ($6.45), Egypt ($2.88), South Africa ($5.88), and Ghana ($7.0).

Also, some evidence suggests that the Nigerian state does not get actual value for the lavish incentives it splashes on Dangote. In the DCC’s 2016 annual report (p.139) for example, the company’s own independent auditors have pointed out that the company’s directors had made an ‘assumption’ about the pioneer statuses of different lines of productions at Ibese and Obajana factories. Without this ‘assumption’, the auditors concluded that:
“..an additional tax charge of N64.4 billion (2015: N40.0 billion) would have been incurred by the company if this assumption was not made in determining the tax liability.”

So, while the Nigerian state has subsidised Dangote generously, such efforts do not appear to have yielded benefits for both the state (which is not paid what is due to her in taxes) and Nigerian cement consumers (who buy cement at over 300% price differentials compared to other consumers elsewhere).

Moreover, with the cement manufacturing process being highly mechanised, the much-vaunted jobs created by the transformation of the industry is, in the final analysis, not worth the costs incurred from subsidization and the expensive cement prices Nigerians pay. For instance, the entire cement industry currently employs only around 30,000 workers directly, and most of these workers are truck drivers. Hence, it does not make any economic sense for Nigeria to, in a bid to keep a few thousand Nigerians in employment, sacrifice national housing needs/infrastructural development by forcing millions of Nigerians to pay extortionary cement prices. Dangote and other players in the industry cannot of course claim credit for the indirect jobs in the downstream retail segment of the industry because such jobs have been there and would still remain regardless of whether cement in produced locally or imported.

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But how has Dangote managed to ‘cement’ his cake and eat it? The answer to this crucial question lies in understanding the nature of two domains of relations, that is: The Dangote-government relations as well as his public or civil society management relations.

Dangote-state relations took off in earnest towards the end of the OBJ first term, that is around the time the BIP was introduced. In his book, ‘The Accidental Public Servant’, Mallam Nasir El-Rufai, explained that Dangote came close to the OBJ government after the former president had fallen out with his powerful vice and major Peoples Democratic Party (PDP) financier at the time, Atiku Abubakar. Consequently, according to El-Rufai, “Obasanjo had to resort to raising money from other sources and that was how Aliko Dangote came into prominence in the government.”

A document from the US embassy in Nigeria leaked by Wikileaks would later reveal that “Dangote purportedly contributed 200 million naira (about $1.5 million at the time) to Obasanjo’s first term election campaign, and in 2003 at least another 1 billion naira (about USD 7.5millio) for the second term. Dangote is a known contributor to the PDP party.” The cable therefore concluded that, ‘it is no coincidence that many products on Nigeria’s import ban lists are items in which Dangote has major interests.’ Former President Yar’Adua of blessed memory saw through this kind of Dangote’s much-vaunted ‘entrepreneurial acumen’ and moved to free poor Nigerian cement consumers from the monopolistic exploitation before the cold hands of death cut him short. Ever since, the business continues with successive regimes securely holding the cement cash cow by the horns for Africa’s ‘entrepreneurial guru’ to milk in exchange for God knows what.

It is instructive to point out here that across the globe, investment in the cement industry takes between 20-30 years to deliver returns. However, in Dangote’s case, returns were delivered in less than a decade. To be clear, no one should begrudge Dangote his fundamental economic right to capital accumulation, however, such private economic right should also not be enjoyed at the social cost of denying Nigerians their fundamental right to housing through extortionary pricing of a product that their own state subsidizes, disproportionate to the social benefits for that matter.

Also, across the globe, profit margins in cement companies range between 30-40%, yet, in Nigeria it is up to 63%! This is because a couple of Nigerians gifted with ‘entrepreneurial acumen’ have the wherewithal to ‘lobby’ state officials to protect the market for them to charge whatever price they fancy. In a paper, Richard Itaman and Christina Wolf calculated that between 1999 and 2010, when cement import was severely restricted before its eventual ban, the Nigerian cement consumers, on average, lost N19.63 billion (that is, around $51.4 million in 2021 USD/Naira value) per year because of buying cement at exorbitant prices compared to the rest of the world. In fact, during the same period, Richard and Christina observed that cement prices had progressively increased by up to 300%.

In addition to ‘lobbying’ the political leadership, Dangote, as investigations by Michael Odijie and Anthony Onofua reveal, ensures the extraction of massive rents in the industry without any opposition from any quarters through his patron-clientelist relations with, and alleged infiltration of, trade/labour union and public/civil society organizations. The authors observed that Dangote generously ‘donate’ to the activities of these civil society groups with a view to ‘promoting the [BIP] policy as a major success.’. The authors stated that he installed his allies in the leadership of critical trade organizations such as the Manufacturers’ Association of Nigeria (MAN). Incessant ‘donations’ and yearly ‘gifts’ to such organizations as the National Association of Block Moulders of Nigeria and Trade Union Congress have also been attributed to silencing the voices of comrades who were hitherto vehement campaigners against extortionary cement pricing. Michael and Anthony have also observed trends in the co-optation of the media to popularise the narrative that local cement manufacturing is a collective national ‘success’.

THE WAY FORWARD

The new administration of President Bola Tinubu will do well by moving in the interest of impoverished Nigerians to address this cement issue decisively. Nigeria should not continue to protect a couple of producers at the expense of millions of Nigerian cement consumers. According to former minister of finance, Mrs Zainab Ahmed, ‘the Federal Government will require about $100 billion annually for the next 30 years to effectively tackle Nigeria’s infrastructure challenges.’ Also, the United Nations remarked that “Nigeria’s housing sector is in a complete crisis”. Undoubtedly, a critical part of addressing these challenges/crises is by making cement prices affordable to Nigerians. How can this be done? In my view, since the cement producers have been protected and subsidized for longer and larger than necessary, it is time for the cement market to be completely liberalized to allow for imports. This will facilitate competition which will beat prices down and ease the excruciating economic hardship of Nigerians. This is elementary economics. Even if local manufacturers who have been mollycoddled for over a decade fail to compete, so be it! The social benefits of suspending the long imports ban far outweigh the largely private benefits of sustaining it. The benefits of promoting indigenous private capital accumulation or keeping less than 30,000 largely truck-drivers’ jobs are not worth making millions of Nigerians homeless in their own fatherland. So, President Tinubu has a choice to make between appeasing a couple of capitalists/cronyists or salvaging millions of poor Nigerians who have no roof over their heads.
Dangote’s refinery: Like cement, like oil?
In celebrating the construction/commissioning of “world’s largest single-train petroleum refinery” without asking some critical questions, we, Nigerians, appear to have given in more to our sentiment than to our rationality. According to the Central Bank of Nigeria (CBN)’s governor, Mr Godwin Emefiele, who according to Dangote “moved mountains to ensure the success of [his refinery] project”, the apex bank ensured the availability of foreign exchange to Dangote to pay for equipment imported for his $19.5 billion refinery. What amounts of this scarce foreign exchange was sold to Dangote? What other monetary and fiscal incentives have been provided to the entrepreneur for the refinery project, and under what terms and conditions? Will all imports of refined oil and assorted products henceforth be banned for Dangote to enjoy another monopoly status in the oil industry, like he does in cement with all its concomitant consequences? Is the 20% Nigerian National Petroleum Corporation (NNPC)’s stakes in Dangote’s refinery a bait, decoy, or marriage of convenience to attract state patronage for profiteering business as usual?
Hamisu Hadejia (PhD)

Opinion

The Benefit of State Creation, By Adnan Mukhtar

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Comrade Adnan Tudunwada
Adnan Mukhtar Tudun Wada

 

 

On July 11, the Senator representing Kano South Sulaiman Abdulrahman Kawu Sumaila sponsored a bill for the creation of a new state, Tiga State.

This is not the first time that people from different parts of the country are agitating for the creation of new states in their region.

The call for the creation of Tiga State didn’t start today ,During the regime of Late General Sani Abacha the creation of Tiga state gatheres momentum ,Insiders in the Presidential Villa confirmed that General Abacha have already made up his mind to carve out Tiga state from the present Kano state but due reasons best known to him the Late Head of state announced the creation of Zamfara state from the Northwest on 1st October 1996,even with that the agitation did n not die down , I came across agitators for Tigari State from Kano North and Tiga from Kano South while in Secondary school during the administration of Chief Olusegun Obasanjo.

Ned Nwoko, a Senator from Delta State sponsored a similar bill for the creation of Anioma State.

Young men like me who are in their early 30s and not current with issues in the country may think that the recent move by Senator Sumaila was the first of its kind.

There were similar requests for the creation of Okura state out of Kogi, Aba from Abia, Hadeija from Jigawa, Katagum from Bauchi, Karadua and Kafur from Katsina, Lagoon from Lagos, Borgu, Kainji and Gurara from Niger and many more.

In 2013, the House of Representatives received more than 50 requests for the creation of new states.

The creation of states began in 1967 when General Yakubu Gowon created 12 states after abolishing the regional system, General Murtala Mohammed 7 states, General Ibrahim Babangida created 11 states between 1987 to 1991 and General Sani Abacha created 6 states.

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Some young men on social media were criticising the move by the Senator by expressing their pessimistic thoughts that the bill may not scale a second reading or get the assent of the President. They argued that such requests had never given any priority since the return to democracy 25 years ago. The idea of creating more states is dead on arrival.

Some are of the view that such moves require a very long process because constitutional amendment in the country is a very difficult thing.

While states in the country relied on federal allocation to survive, they can’t pay salaries and their internally generated revenue has been very poor; the creation of additional states is adding a burden to the Federal government at this time of economic instability.

Nigerians are facing the most difficult economic condition under President Tinubu. Sadly, the President doesn’t care to address this critical issue by going ahead to purchase a presidential aircraft that’s worth 150 billion dollars although the president has yet to increase the minimum wage, long queues at the filling stations, a bag of rice is close to 100k with a 30k minimum wage; I wonder whether the president is serious enough in attending to this matter of National concern.

Some of the agitators of this are seeking the expansion of platforms for their citizens to utilise their potential under a federal system of government.

It was not a wrong thing to come up with this idea but a constitutional right. I’m sure most of these agitators and bill sponsors are speaking the minds of their people.

Some people are accusing Sumaila of trying to divide the people of Kano. These sets of people are deceiving themselves. The people of Kano South have been crying about marginalisation and being denied the dividends of democracy since 2011.

Abubakar Rimi was from Sumaila in Kano South, he governed Kano in the second republic. Kabiru Gaya governed Kano in 1993 and since then, the people of this zone are yet to be given any chance to govern Kano.

They have also been crying that most of the developmental and infrastructural projects are been centred in Kano Central while abandoning the rural areas.

State creation in states like Kano with 44 local governments will enhance development and bring government closer to the people.

While I support the idea of having more states like in the US, we should put this at the back of our mind states are building blocks for development in the Federal system of government and will boost democratic governance.

Adnan is a political PR consultant, he teaches Islamic History, Culture and Civilization at Federal University Dutsin-Ma. He can be reached at adnanmukhtaradam@gmail.com

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Opinion

The Political Motivations Behind Nigerian State Creation: A Historical Analysis

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Nigeria's Map
Nigerian Map

 

Abdullahi Dahiru

Many proponents of state creation believe that Nigerian states were created for progress and development but history tells us otherwise.

Sarkin Kano Sir Muhammad Sanusi had dispute with the then Northern regional government leading him to abdicate the throne in 1963. Many Kano people were angry with the way the Northern regional government treated Sarki Sanusi and decided to form a pressure group called Kano Peoples’ Party, KPP. KPP agitated for creation of Kano state out of the then Northern region because many Kano people believe the regional government unfairly treated Kano province even though the province contributed revenue to the regional government more than any other province. KPP also agitated for the reinstallation of Sarki Sanusi as the Emir of Kano.

After 1966 military coup, there was tension between the Eastern region and the central government. The governor of the then Eastern region Odumegwu Ojukwu decided to secede from Nigeria to form an independent nation of Biafra. Just 3 days before Ojukwu’s decleration of independence, the head of state Yakubu Gowon abolished the regional governments and created 12 new states. The purpose of the state creation by Gowon was to reduce the power of Ojukwu and get the support of minorities and other sections of the country. Kano province was among the new states created as Kano state partly fulfilling the wishes of the KPP.

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State creation became an important aspect of military rule. Murtala regime created seven more states bringing the total number of states to 19. In 1987, Babangida’s political bureau recommended creation of two additional states to make the total number of states divisible by three, so as to get a perfect number when 2/3 of states is being computed to determine the winner of presidential election. This was to prevent the recurrence of dispute of 1979 election about what is the 2/3 of 19 states. So Babangida created Katsina and Akwai Ibom states in 1987.

Babangida and Abacha created more states in 1991 and 1996 bringing the total number of states to 36. The 1991 and 1996 exercises were done when there were pressures for Babangida and Abacha to handover power to civilians.

During the military regions committees were formed to recommend states to be created when there were plans to do those exercises. The committees receive requests from different groups for creation of states but the ultimate decision was done by the military council. The military do that often to satisfy lobbies from high ranking military officers and powerful Nigerians. It is often not about the people or development.

State creation was easy under miltary regimes since the constitution is usually suspended. A sole administrator is posted to the new state and take up grant given by government. That is very difficult in civilian administrations because of many bottle necks.

Whoever analyses the history of state creation in Nigeria he will know that it is almost exclusively done by military regimes and it is not something done for development or anything but political expediency. The most economically viable Nigerian state has remain a single state since 1967. Civilian administrations have tried several times to create new states without success. Many states that were created are surviving only because of monthly revenue allocation from the Federal Government. Without that federal allocation, they are nothing.

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Opinion

Kawu Sumaila: A Senator in need and indeed, By Adnan Mukhtar

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I forwarded a complaint to Senator Sumaila two weeks ago over the lack of water, school, and basic amenities for the people of Kawuri and Bangashi Villages at Gaya Local Government. I told the Senator that my washerman sent this complaint to me that they have been suffering for decades over lack of water and other basic amenities in their villages. The Senator replied to me with ” Noted Adnan zamuyi abun da zamu iya.”

Kawu swung into action the next day by sending his men to construct two boreholes for each town and assured them of bringing more dividends to them as they requested.

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This is called excellent representation. Doing exactly what will bring rapid development to his zone and Kano State.

Just some weeks ago, the super Senator supported a bill for the establishment of a Federal Medical Centre at Rano, the headquarters of Kano South, which was presented to the House by Rt. Hon Kabiru Alhassan Rurum, and today he is presenting his sponsored bill for the creation of Tiga State. This is a welcome development.

Something that people are not aware of is that the entire members of the House of Representatives from Kano South are united to bring something positive to their people.

People like Rt. Hon Kabiru Alhassan Rurum, Dr. Abdulmumin Jibrin are all over bringing the dividends of democracy to their people.

 

Adnan is a university lecturer, lobbyist, and political PR consultant

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