Lessons from Kogi’s Hardline Posture on Dangote’s Obajana Cement Factory

 

Although the federal government on Friday ordered the immediate reopening of the Obajana Cement factory shut on the order of the Kogi State Government, the spat between the state government and Dangote Industries has underscored the urgency of a review of Nigeria’s investment policy and an affirmation of the role of courts in conflict resolution, writes Festus Akanbi

Members of the Nigerian investment community heaved a sigh of relief on Friday when the nation’s Security Council mediated in the lingering dispute between the Kogi State Government and Dangote Industries Limited over the ownership of the company’s Obajana Cement factory.

The council, in one of the decisions at its meeting, directed that the Dangote Cement factory at Obajana in Kogi State, shut on the order of the Kogi government should be re-opened for business.

The council asked the parties involved to seek a judicial determination of the ownership of the cement factory.

The Minister of Police Affairs, Alhaji Maigari Dingyadi, who addressed the correspondents after the meeting, said an agreement had been reached to ensure the re-opening of the cement company in Obajana.

He said: “An agreement has been reached between the Kogi State government and the Dangote Cement in Kogi on the need to re-open the factory and ensure that there is peace in the state. The government is committed to the provision of employment to its citizens rather than closing factories that will make people unemployed. We do hope that the parties involved will respect this agreement and come to terms with the memorandum of understanding signed by the parties involved,” he added.

Also speaking, the Minister of Interior Affairs, Mr. Rauf Aregbesola, said the council has also advised that all issues relating to that industry or factory should be resolved legally, saying nobody must take the law into their hands as a government or an individual.

The Kogi State government and Dangote Group have been at loggerheads over the ownership structure of the cement factory. 

Watchers of the unfolding drama were surprised that the state government could still go ahead to escalate the dispute after the management of Dangote Industries had published its defence of the allegations levelled by the state assembly.

Analysts were also shocked that a state like Kogi with its extremely low capacity to generate adequate employment for its teeming youths could put the jobs of those already engaged by the cement firm at risk.

They contended that the state government’s hardline posture contradicts the federal government’s position on investment promotion by state governments in this period of serious revenue challenges.

For instance, the Secretary of the Nigerian Investment Promotion Commission (NIPC), Yewande Sadiku, was recently quoted as saying that the current revenue crisis in the country demands that state governors should lead in attracting investments to their states.

 Sadiku, who maintained that investments are mostly generated at the state level due to the relative autonomy of states, was quoted as saying that “investment promotion is most effective when state governors see themselves as the chief investment promoter and the person who heads the investment promotion agency (IPA) is your first assistant.” 

This is perhaps why investment analysts said there is an urgent need for all the stakeholders in the nation’s economy to wade into the current dispute between the state government and Dangote Industries Limited for a quick resolution in the interest of the thousands of direct and indirect staff of the company.

Analysts said due process should be followed by the KSG in bringing DIL to book, in case it has erred in the process of acquiring the Obajana Plant, saying the resolution to the crisis should be immediate, for the sake of thousands of employees and even the investors of Dangote Cement, some of who are foreigners. 

Another salient angle to see the implication of a protracted crisis in Dangote Cement, Obajana is the issue of cement scarcity. The plant in Obajana currently produces more than 30% of the country’s cement consumption and if not quickly checked and resolved, the country will witness acute cement scarcity which automatically will translate to an increase in cement prices across the country.

The time for the federal government to act decisively for the sake of the economy and the country is now, to save it from the impending crisis in the construction sector.

The state government had asked Dangote Industries to focus on “proving its ‘total ownership’ of Obajana Cement Company rather than chasing shadows”.

Its Information Commissioner, Mr. Kingsley Fanwo, said the raging controversy over the ownership of Obajana Cement Company was not that of an individual but a collective agitation by indigenes of the state who had felt short-changed for too long as regards the subject matter.

Fanwo noted that only the truth could resolve the ongoing ownership crisis, maintaining that the state will not succumb to any psychological warfare, adding that the struggle was about the good people of Kogi State and also the integrity of the nation.

Rising to the Challenge

Last week, the management of DIL, in responding to the challenge by the state government to prove its ownership of the disputed cement firm, insisted that its acquisition of the land for Obajana Cement in 2002 followed due process, contrary to its claim.

It also stated that the company as a responsible corporate organisation had been paying relevant taxes, levies and charges to the state government since 2007 when production commenced in the acquired cement plant. 

According to the clarifications which were contained in a statement issued on Tuesday, the management of Dangote Industries explained that “the land on which the Obajana cement plant is built was acquired solely by Dangote Industries Limited (DIL) in 2003, well after it had acquired the shares in Obajana Cement Company in 2002, following the legally binding agreement it entered into with KSG to invest in Kogi State. DIL was issued three Certificates of Occupancy in its name after payment of necessary fees and compensation to landowners.”

Justifying its claims that it has not violated any agreement nor failed to honour any outstanding obligations to the Kogi State Government, the DIL explained further that “The plant and machinery were conceived, designed, procured, built, and paid for solely by DIL, again, well after it acquired the shares in Obajana Cement Company.” 

“The limestone and other minerals used by the Obajana Cement Plant, by the provisions of the Nigerian Constitution belonged to the Federation, with authority only in the FGN and not the state in which the minerals are situated, to grant licences to extract and mine the resources”, the company explained. 

Compliance with the Lease Agreement

Shedding more light on the issue, the company stated that “after the agreement with the KSG, DIL applied for and obtained mining leases over the said limestone from FGN, at its cost and has complied with the terms of the leases since inception,” pointing out that the government of Kogi State had no minerals to give, had no assets to give, and only invited DIL as most responsible governments do to come into the State and invest in a manner that will create employment, develop the state, and earn its taxes.”

It explained that it was able to secure three certificates of occupancy after the company had paid compensation and necessary fees to landowners, well after it had acquired the shares in Obajana Cement Company in 2002, following the legally binding agreement, it entered into with KSG to invest in Kogi State,” the statement said.

The company stated that “in 1992, the Kogi State Government incorporated Obajana Cement PLC (OCP) as a public limited liability company. Sometime in early 2002, about 10 years after the incorporation of the OCP (which still had no assets or operations as of that time), KSG invited Dangote Industries to take the opportunity of the significant limestone deposit in the state by establishing a cement plant in the state.

“Following several engagements and assessment of the viability of the proposed opportunity, DIL agreed that it would establish a cement plant in Kogi State and provide the entirety of the substantial capital required for the investment.

On the issue of an agreement between Dangote and the state government, the statement noted that “it was agreed, inter alia, that: DIL would establish a cement plant with a capacity of 3,500,000 metric tonnes per annum; DIL shall hold 100 per cent of the shareholding in OCP, and source for all the funds required to develop the cement plant; KSG shall have the option to acquire five per cent equity shareholding in OCP within five years; and KSG shall grant tax relief and exemption from levies and other charges by KSG for seven years from the date of commencement of production.

“Consistent with the terms of the agreement, DIL sourced 100 per cent of the funds that were used to develop the plant without any contribution from KSG. In line with its rights, ensuring alignment with the Dangote Brand, as part of internal restructuring and for better market recognition the name of OCP was changed to Dangote Cement Plc in 2010, and several other significant cement companies (such as the Benue Cement Company) owned by DIL were merged with OCP to become the enlarged Dangote Cement Plc.”

Kogi Couldn’t Meet Financial Obligations

It noted that KSG “could not meet its financial obligations of contributing to the funding the plant in any form; neither could KSG fund acquisition of five per cent equity shares in OCP when it was asked on several occasions to exercise the purchase option.

“KSG also did not meet its obligations to grant a waiver of taxes, charges and levies that it could charge the operations, affairs and activities of OCP. Rather despite being entitled (under the terms of the agreement with KSG) to tax relief and exemption from charges and levies by KSG for seven years from the date of commencement of production, OCP (and now DCP) has paid all due sub-sovereign taxes, levies and charges to KSG since it commenced production in 2007.”