The Threat to Industrialisation

The recent declaration by the President of Dangote Industries Limited, Mr. Aliko Dangote, that he has dropped his desire to invest in the country’s steel industry is a pointer on how overbearing regulators can hurt the country’s strides toward industrialization, writes Dike Onwuamaeze

The Dangote Group has been at the receiving end of regulatory harassments and disinformation. In the first week of January, operatives of the Economic and Financial Crime Commission (EFCC) stormed its head office in Lagos in a Gestapo style. Their mission was not to deliver the New Year’s felicitations of prosperity and wellbeing but on a purported probing of foreign exchange allocations during the tenure of the former Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, that were allegedly not approved by ex-President Muhammadu Buhari.  Till date, nothing has been heard of the investigation’s outcome that caused the Dangote Group public embarrassment.

Few months ago, the House of Representatives vented its anger on manufacturers of cement, labeling operators in the sector monopolists. Some of the honourable members said that arbitrary increase of the price of cement is one of the cankerworms threatening the peace and economy of Nigeria due to worrisome unpatriotic attitudes of manufacturers of cement. Dangote Group is the leading cement manufacturer in Nigeria.

However, the last straw that broke the proverbial Camel’s back was the recent allegation by Nigerian Midstream and Downstream Petroleum Regulatory Authority, (NMDPRA) that the quality of petroleum products from the Dangote Refinery and other modular refineries in the country are inferior to imported ones.

The Chief Executive Officer of NMDPRA, Mr. Farouk Ahmed, told journalists that the Dangote Refinery has not been issued an operational licence and is still in its pre-commissioning stage and about 45 per cent completed.

Ahmed said: “Dangote Refinery is still in the pre-commissioning stage. It has not been licenced yet. We haven’t licenced them yet. I think they are about 45 per cent to completion.

“We cannot rely on one refinery to feed the nation, because Dangote is requesting that we suspend or stop imports, especially of AGO and DPK, and direct all marketers to his refinery. That is not good for the nation in terms of energy security, and it is not good for the market because of the monopoly.

“Dangote Refinery, as well as some modular refineries like Watersmith Refinery and Aradel Refinery, are producing between 650 and 1,200 PPM. Therefore, in terms of quality, their products are inferior to imported ones.”  

These allegations came few weeks to the scheduled commencement supply of petrol from Dangote Refinery.

But Aliko Dangote has dismissed allegations made by the NMDPRA, insisting that his product is 80 per cent better than imported diesel.

However, the haunting and hounding of the Dangote Group has brought about a negative outcome following Aliko Dangote’s declaration that heas halted his proposed investment in steel “to prevent accusations of being branded a monopoly.”

He said: “You know, about doing a new business which we announced, that is, steel. Actually, our board has decided that we shouldn’t do the steel because if we do the steel business, we will be called all sorts of names like monopoly.

“Let other Nigerians go and do it. We are not the only Nigerians here. There are some Nigerians with more cash than us. They should bring that money from Dubai and other parts of the world and invest in our fatherland.”

Dangote Group’s roundabout turn from investing in the steel sector would be a significant blow to Nigeria’s quest to diversify and industrialise its economy through efficient mobilisstion of its domestic natural resources.

The Dean, Faculty of Social Science, University of Lagos, Professor Adelaja Odukoya, said that the allegation against Dangote Group “is to say the least most unfortunate.

“If the agency is sure of its allegation against the Dangote refinery what stops it from doing the needful by prosecuting the company and its owners. Are they afraid of something? Is there a conspiracy? This is shameful. We should by now have gone beyond media prosecution. Since Mr. Dangote has replied and thrown a challenge to the agency it has been quite of the graveyard from that quarter. Who is fooling who?”

The professor also told THISDAY that there would be no industrialisation without iron and steel because technology, tools and machines that are sine qua non to industrial breakthrough are to be produced using steel.

“This was the logic of the Ajaokuta Steel Rolling mill that succeeding kleptocratic governments killed most shamefully. It was a tragic abortion of our dream of industrialization,” he said.

A research paper titled “Ajaokuta Steel Project and Nigeria’s Industrialisation” that was authored in 2002 by a Research Fellow of the Nigerian Institute of International Affairs, Dr. Osita Agbu, described the planning and implementation of the steel project as a sore point in Nigeria’s quest for industrialisation.

Agbu said: “There is the imperative for Nigeria to plan and execute what is akin to a technological revolution. This is necessary at this stage of the country’s industrial development.

“Experience has shown that technologies relevant for industrialization cannot simply be transferred. They can only be acquired through the development of an indigenous broad-based scientific and technological infrastructure of which the iron and steel industry, and in particular, the Ajaokuta Steel Project is undoubtedly crucial.”

This was the hope that was revived when Dangote Group declared that it would invest in the steel sector but dashed with Aliko Dangote’s declaration that he would no longer venture into the steel development.

The Chief Executive of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, told THISDAY that the pathway to economic independence is ensuring less dependence on imports. This, according to him, is what Nigeria should prioritise, especially given its current vulnerabilities to external shocks.

Regrettably, the Nigerian economy had suffered the worst bleeding from the oil and gas sector, both downstream and upstream from the hands of  some elements in the regulatory space that seek to perpetuate the status quo.

Yusuf noted that the recent pronouncement by NMDPRA did not reflect commitment and enthusiasm about domestic refining of petroleum products. “This is naturally very troubling,” he said. 

He added that in any market system, competition delivers tremendous value to consumers and the economy. But such competition has to be within the same context. Hence, “competition between imports and domestic production cannot be a fair and true competition. What we should commit to is to promote more domestic refining of petroleum products,” he said.

Yusuf regretted that because of the experience with the NMDPRA, the Dangote Group had dropped its aspiration to go into iron and steel production. 

“My hope is that the government would prevail on the president of the Dangote Group to have a rethink. This of course would require the normalisation of the regulatory environment to support and incentivise domestic production.

“It is extremely difficult to industrialise an economy without a virile iron and steel sector.  Regrettably the billions of dollars of investment by government in iron and steel sector had practically gone down the drain. 

“Currently we are about 90 per cent dependent on imports for our iron and steel needs. This is not healthy for our economy,” Yusuf said.

Are Monopolies always bad

A university don who spoke anonymously told THISDAY that everything about a monopolist is not bad, adding that a monopolist can even be encouraged in businesses that would require deployment of huge capital investments like oil refinery. According to him, “building a refinery is not the same thing as establishing and owning a petrol filling station.

“How many Nigerians have, or could mobilise, $19 billion for a single project as Aliko Dangote has done?”

According to him, even in the United States of America that is the heart beat of global capitalism tolerates some level of monopoly in certain sectors of its economy. He asked: “Is Boeing not almost a monopoly in the aircraft manufacturing industry? Is Samsung not almost a monopoly?

“This is the reason the federal government should support the Dangote Refinery. It is not for the NMDPRA to speak on the quality of Dangote Refinery’s products because it is almost an importer of refined petroleum products that will compete with Dangote.

“If it wants to be taken serious, it should invite an independent international organisation to speak on the quality of Dangote Refinery’s products.”

The university don, however, stated that it takes strong regulatory atmosphere to tame a rampaging monopolist. “But not a regulator like NMDPRA that is almost a competitor with Dangote because of its symbiotic relationship it has with the NNPC” that has four refineries it could not fix but relied on importation to meet Nigeria’s need for refined petrol products.

Private Monopoly vs. Public Monopoly

Speaking in the same vein, the immediate past President of the Institute of Chartered Accountants of Nigeria (ICAN), Mr. Innocent Okwuosa, described a monopoly as a market structure where there is a single provider of goods or services that have no close substitutes. This provider could be a private firm or a public corporation like the Transmission Company of Nigeria (TCN) for transmission of electricity in Nigeria.

Okwuosa said that monopoly in any form, whether private or public, is not good at all for the citizens because it would not allow for competition, especially price competition and innovation.

He said: “The consumers are usually at the mercy of the monopolist when it comes to fixing prices, which is done arbitrary to maximise profit since consumers have no alternative. So I will term both of them as two evils.

“But between these two evils, though they are evils, one may be considered a lesser evil than the other and to this end I will say that private sector monopoly is better or less evil than public sector monopoly.

“My simple reason is this, the private sector monopoly can still strive to provide an efficient service and make the goods or services available, because profit maximisation motive or regulation can force that.

“But public sector monopoly in Nigeria, watch I say Nigeria, will in addition to all the defects of monopoly fail to provide efficient services and make the goods or services available.

“This is because in the Nigerian public sector, there are no consequences for non-performance, as those employed are filling ethnic quota.

“Could you recall the trauma we went through in the hands of NITEL for telecommunication services that were never provided after paying humongous amount to be provided with telephone, land phone for that matter.

‘Have you wondered why we have about four refineries and the staff are collecting salaries with other huge administration costs and yet no litre of fuel is being refined? Yet, no consequences for non-performance in both cases.”

According to him, a private sector monopolist is after profit that is possible only with the provision of the goods or services. “And so if I will be blunt a Dangote Refinery monopoly for supply of fuel is far better than NNPC fuel importation or supply of fuel from the four refineries in Nigeria,” he concluded.