On monopolies

Nigeria today reminds one of the George Orwell book “Animal Farm” in so many ways. Apart from the sacred Cows, there’s also how much discomfort we face because of the actions of the many who for narcissistic reasons are committed to putting the cart before the horse.

One of such actions happened over the last week of February, but this event quietly slipped through the cracks because of a slew of high-profile school kidnappings. It bears looking at, however.

On 28 February the Chief Strategy Officer of Dangote Group, Aliyu Suleiman said that the importation rights for petrol should be awarded only to licensed and active refineries in Nigeria. This demand was in his speech to members of the National Assembly’s Joint committee on PIB that paid a visit to the project site of the proposed refinery.

Suleiman insisted that any need to supplement production shortfalls in the local production of petroleum products due to maintenance procedures or whatever else should be legally limited to the companies with active refining licences. This means that they should be the ones to benefit from their own failure to do what they were licensed and partly subsidised to deliver to the marketplace. This idea could also prevent the forces of demand and supply from determining market trends with imports not being allowed to compete with local supply and hopefully get us a truly competitive pricing regime.

The very fact that demands like this can be made openly and to members of a National Assembly that should be made up of people who look out for their respective constituencies shows us how unbalanced things are. For starters, we ought to understand that Nigeria will not move forward just by virtue of Dangote being made wealthier. You do not lift a society by taking from everyone so you can make one person a god. The deification of an individual at the expense of the majority is not useful.

We really should not have to remind people who have spent almost half a century in and around government that personalization of government policy is a flawed approach that’s responsible for much of the damage associated with less balanced government models like monarchies and theocracies.

A public policy is a course or principle of action chosen by a government for the achievement of specific goals that should ideally favour as much of the society as possible.

Policies are abstract vehicles that take you from one point to another and vehicles can only perform their primary function of providing mobility when the components responsible for Drive are placed in the right positions relative to the other parts of the system, hence the idiom about carts being positioned in front of horses.

It is amazing to see the extent to which Nigeria’s macroeconomic policies are tweaked to give Dangote’s companies favourable treatment that doesn’t translate into cost-effective benefits for the rest of the nation. Macroeconomic policy should help create a stable economic environment for the majority. Nigeria goes too far with how its fiscal policy, industrial policy, and exchange rate policy are bent to accommodate Dangote’s business interests.

Fiscal policy is partly effected through taxation models and Dangote’s privilege when it comes to tax exemptions and holidays are the stuff of legend. Nigeria’s exchange rate policy is also engineered to favour him with preferential rates being made available.

Local production is useful but it should not come at all costs. So much was made of the expected outcomes for Nigeria if cement production was localised but have the premises for those promises been proven right? Available data shows that Nigerian cement firms have the world’s highest profit margins with Dangote Cement having margins of 45% when margins of major cement producers in other countries in India, Germany, Mexico, Germany range from 1% to 14% with one other outlier being China’s Anhui Conch Cement that has a 21% profit margin.

Margins this high in what is arguably the least developed continent on the planet do not make a lot of sense. Having profits from lower margins on higher volumes would give more of a mutually beneficial situation.

The cement business is generally accepted as one with low margins that are made bearable with high volumes but in Nigeria, it is Apple Inc without the multiplier effect on innovation and systems. It just drinks up money without even paying anything close to its fair share of taxation.

Nigeria has a housing deficit of 20 million units. There is also the need to build roads which could be done with concrete. These roads would help with industrialization, agriculture, security, speed of economic cycles and so much more.
The effects of these deficits are costing us dearly and resources are scarce.

Does Nigeria get optimal value as a nation for the effective subsidy Dangote gets via lenient forex rates and tax exemptions?

What exactly does Nigeria gain from even contemplating personalising its petroleum importation policy and resource for Dangote and agreeing to reward the company for failure in production, if the outcomes won’t alleviate the problems?

The personalisation of policy and resources has led to absurdly high prices for cement, expensive housing, and a personal dream to buy Arsenal Football Club while the Nigerian League flounders partly because of the poor economy. Some opposition to the call for what is effectively a monopoly on fuel imports has come from the body of oil merchants known as the Major Oil Marketers Association of Nigeria (MOMAN) has advised that it is much better to have an open market where imports and local production interact in an open market that hopefully evolves in favour of the Nigerian people.

The current regime has the NNPC as the sole importer of petroleum over the last 3 years. On several occasions, petroleum marketers have asked for this monopoly to be ended. We must not trade a public monopoly for a private monopoly.

As the rest of the world races quickly towards their ever-rising targets for national development and progress, Nigeria bemusedly continues to loiter around the starting line trying to figure out why its tactic of placing the Chariot in front of its Horses is not working. Nigeria is trying everything from violence to even prayer albeit without success. Well, almost everything because what Nigeria has failed to do is simply put the horses in front of the chariots so they can get going like everyone else.