The current drama between Dangote Refinery and the NNPCL reminds me of an article I read somewhere titled “The Bear, Lion, and Tiger: A Lesson in Business Adaptation with Jeff Bezoz. In the article, Jeff Bezoz was reported by the author to have posed a question seemingly out of the blue in a conference of CEOs many years ago, “Who would win in a fight, a bear or a lion?” He followed up with a response: “It depends on the terrain.” Businesses will win in a favourable climate for investors, and they will not survive where the environment is hostile as a result of policy inconsistency and parochial interests of regulators.
“However, over the years, successive governments have struggled to effectively manage the industry and develop policies that safeguard both businesses and consumers.”
On regulators
Concerning regulators, I remember what a scholar wrote somewhere:
“Regulators being government-granted monopolies with a captive “client” base are unregulated. There is no robust regulation of their performance. There is no quality-assurance regulation of the job these regulators do. They are not accountable to the public in a meaningful way. In theory, agencies are regulated by the political process, but the political process is so ineffective at regulating the regulators that the regulators are de facto unregulated.”
The foremost principle for any regulator, in my view, should be to protect consumers and foster the growth of Nigerian businesses. Period. Regardless of the challenging business climate, Nigeria needs ‘business titans’ like Aliko Dangote. However, over the years, successive governments have struggled to effectively manage the industry and develop policies that safeguard both businesses and consumers. Ideally, we would have seen national and sub-national policies and strategies designed to cultivate more ‘business titans’ akin to Dangote across various sectors of the economy.
Ascent to tiger nation status
Some industry experts who have observed Dangote’s ascent to “business tiger” status argue that he has consistently maintained a cordial relationship with whichever government is in power. So what? They further contend that politicians have granted him undue advantages over his competitors. The current rift between him and the regulator, they say, stems from his falling out of favour with those in power. A low-grade media war between the regulator and Dangote Refinery is evident, with accusations and counter-accusations flying back and forth. One thing is certain: the truth will eventually come to light in the fullness of time.
Allow me to take a moment to express my perspective. Nigeria is in dire need of numerous “business tigers” across both the oil and non-oil sectors. These are visionary CEOs whose companies can navigate and thrive even in challenging economic climates. Unfortunately, many private enterprises have been shutting down recently for various reasons. This has not only stifled economic growth but also failed to generate a demand for skilled workers, exacerbating the brain drain issue.
We’ve all heard of the Asian Tigers—those four powerhouse economies of Hong Kong, Singapore, South Korea, and Taiwan. They earned their stripes by embracing education and implementing economic policies focused on exports and rapid industrialization. This strategic approach has enabled them to sustain impressive economic growth since the 1960s, propelling them into the ranks of the world’s wealthiest nations.
These nations are often dubbed the “four little dragons.” In his book, “The Four Little Dragons: The Spread of Industrialization in East Asia,” author Ezra F. Vogel unveils a fascinating fact: these countries, despite making up less than one percent of the world’s land mass and housing under four percent of the global population, have achieved remarkable industrialization and economic prowess.
The Asian Tigers owe much of their economic success to the flying geese theory of development. In this scenario, Japan led the way, with the dragons following closely behind. A professor once explained to me that these nations, despite being at different stages of economic growth, harnessed the power of interactive growth through emulative learning to propel their economies forward.
Our aspiration is to see Nigeria rise to the status of a “Tiger” nation within Africa. For Nigeria to lead as the foremost goose in the continent, followed by a flock of other nations, significant challenges must be addressed. How can Nigeria achieve this under the current harsh business climate marked by policy inconsistency, weak sectoral linkages, fluctuating foreign currency rates, devaluation of the Naira, bureaucratic hurdles, and soaring costs of doing business? As an advocate for a level playing field for all business owners in the country, I believe these issues must be tackled head-on.
Bone of contention
Returning to the core topic, Aliko Dangote stands out as a “business tiger” in the world of commerce. Why, you ask? He owns one of the largest petroleum refineries globally. Recently, the media has been abuzz with controversies surrounding the Dangote refinery. The ongoing saga between Dangote Refinery and NNPCL has led many analysts to reasonably conclude that there are significant murky dealings that need to be urgently and thoroughly investigated for the sake of public accountability.
A former minister was quoted in a newspaper questioning, “How can a project of such national significance be entangled in such a profound and embarrassing controversy, especially under the scrutiny of both local and international investors?” Indeed, a refinery valued at approximately $20 billion undeniably qualifies as a “national interest project” by any standard.
Aliko Dangote has claimed that international oil companies (IOCs) operating in Nigeria are obstructing his attempts to purchase locally produced crude oil for his $20 billion refinery. The IOCs have remained silent amid accusations of price gouging. Meanwhile, the Nigerian National Petroleum Corporation Limited (NNPCL) has branded Dangote a monopolist. Frustrated and irate, the oil tycoon retorted to the regulator, “Let them buy me out and run the refinery the best way they can.”
“They have labelled me a monopolist.” The constraints of crude oil supply has forced Dangote Refinery to import crude from Brazil and the United States to bridge the local supply gap. To support his business plan, Dangote Refinery is considering buying crude oil from Libya, Angola and any oil producing countries. Out of the 20 percent equity participation with the NNPCL, only 7.2 percent had been fully paid before the deadline issued to the company to acquire the stake.
During a televised interview at the State House, regulators, particularly the NMDPRA led by Farouk Ahmed, accused Dangote Refinery of having unsafe sulphur levels. This accusation was made in the presence of NNPCL GMD Mele Kyari. While Farouk Ahmed, as a regulator empowered by the Petroleum Industry Act (PIA), has the authority to raise valid safety concerns and prevent monopolistic practices for the benefit of consumers, he did not specify what the permissible sulphur level should be.
Alternatively, provide evidence that Dangote Refinery is evolving into a monopoly within the oil industry. Additionally, Dangote has alleged that certain officials from the national oil company possess blending plants in Malta. The GMD of NNPCL has refuted these claims. However, it has been widely reported that Nigeria’s petrol imports from Malta have surged to $2 billion.
According to Nairametrics, there are currently 10 refineries installed across various parts of the country, including four government-owned refineries and the Dangote Refinery. The Kaduna, Warri, and Port Harcourt refineries have been non-operational for nearly 20 years due to ongoing Turn Around Maintenance (TAM). This raises the question: why is TAM taking such a long time and where did regulators test Dangote’s products for sulphur content? It is possible that third-party laboratories scattered around the country were utilised for this purpose.
What’s next?
According to findings from BusinessDay, the Dangote Refinery is poised to exert significant pressure on approximately 90 refineries in Europe, which may face closure due to the intense competition. In light of accusations of monopolistic behaviour, Dangote has abandoned plans to invest in the country’s steel sector. This context sheds light on why Aliko Dangote, in a viral video, expressed his hope that “God will permit all Nigerian entrepreneurs to go to heaven.” While he did not elaborate on his reasons, it is likely due to the challenging business environment.
The ongoing rift between Dangote and the regulators could potentially harm employment and deter investments, casting a shadow over Nigeria’s global image. Amidst this turmoil, reports have surfaced that Gabon’s President, Brice Oligui Nguema, has extended an invitation to Aliko Dangote to invest in the nation’s cement and fertiliser sectors. While advocating for a better investment climate is crucial, it alone won’t suffice to foster more competitive domestic enterprises.
For firms navigating Nigeria’s complex business landscape, having the organisational agility to capitalise on an improved business climate is crucial. The ongoing rift between Dangote and the regulators raises the question: will it dismantle the entrenched cabal of fuel importers and other vested interests that have thrived in a dysfunctional system? In the spirit of national interest, it would be prudent for the Federal Government, Dangote, and NNPC to come together, engage in meaningful dialogue, and find common ground. Thank you.
MA Johnson, Rear Admiral (Rtd)
