On ‘foolishness’, Dangote’s refinery and Nigeria’s economic revival

The recently launched Dangote Petrochemicals Refinery Complex at Ibeju-Lekki in Lagos State is a real wow! This huge achievement made on a petroleum refining edifice, described by many in qualifying words based on how delighted they feel, can be likened to that made on an elephant killed in a country of blind men. The horns, tongue, trunk, ear lobes, the four fat legs, tail or the feel of the skin, actually mean different things to different blind people (by feel of hands), depending on the angles or positions and understanding they hold about the nation’s economy. That is similar to the opinion captured in a published article last week with the title, ‘The “foolish man” and his mega refinery complex’, while rejoicing with Alike Dangote on this generational exploits. It is a narrative on the man who clearly saw a bigger picture, when his compatriots were bogged down with parochialism and immediate monetary gains, many years ago. He is completely absolved as a “wise”, “peerless shrewd investor”, but never a “foolish man”.

This negative commentary must have been borne out of ignorance, pessimism and frustrated despondency, based on the facts on ground at that point in time (read: the state of the economy); the absurdity of the country as a major crude exporter in Africa but, at the same time, a major importer of refined products at the downstream petroleum sub-sector of the economy where absolutely, nothing was working! The entire government owned refineries (Port Harcourt, Warri and Kaduna) were not functional, and still aren’t. With the unfavourable situation on ground then, it was unthinkable for any investor to ever dream of building a refinery; so, let no man blame the person (beyond measure) who remarked that, “only a foolish man will build a refinery in Nigeria”. The man, Aliko Dangote, Africa’s richest man and the President of Dangote Group, through his singular visionary efforts, with the above investments in the downstream subsector, has truly proven his mettle by showing Nigerians that our economy can be fixed. So, there is hope for this country, “if they want”.

In his own comments, the entertainment industry guru and former senator, Ben Murray-Bruce, joined in celebrating Aliko Dangote, and called him a “Hero”, and further stated that, “the government should apologise to Nigerians for being so inept and not being able to do what one man has done”. As a private business, the promoter or the investor has the primary aim of making profit. Based on this premise that business operators in the downstream sub-sector should run a sustainable business operation, the profit component must be there as well. In any situation where the removal of the currently run fuel subsidy regime is mentioned or discussed, as Murray-Bruce commented, “market value” will have to be operational for the business man in his sale of PMS (petrol), for instance. The fact remains that the government should encourage local investors to run thriving businesses within the economy. Aliko Dangote that Nigerians know is truly an entrepreneur (he establishes a business by taking the risk of investing money, with hope of making profit); he knows his onions in the field of business.

Generally speaking, sales of refined products from an investment that took over $18 billion is expected to continuously make reasonable profit (to have an attractive return on investment, ROI). This requires encouragement from the federal government, in the form of an incentive package to protect local investors; and make the real sector more attractive for indigenous investors, especially in the oil industry (so, others need to borrow a leaf from Dangote Group). But the quest for market value on product sales must not mean exploiting the consumers through monopoly in setting outrageous prices, as he is presently in the local market without visible competitors. What the government now needs to do is to walk their talk by adhering to supplies of crude to all local refiners (including future entrants into the sector) in our local currency (naira) denominated values; as already planned or proposed by NNPC Limited. This will be a game-changer for better things that shall start happening in the economy; before moving to economic recovery as the second stage, which is also imminent.

Recovery covers the aspects of the naira gaining traction at the exchange market from two pronged approaches (sale of crude to local refiners in naira denominated value; and secondly, the improved job employment status in the nation’s labour market by getting our youths gainfully employed without much challenges in the near future); deflation of commodities prices (including refined petroleum products). These, among many others are the economic benefits that ordinary Nigerians in the streets shall start enjoying within the economy.

The productivity profile (GDP growth trajectory through improved national economic efficiency), import substitution policy being in action in the oil sector with Dangote’s nameplate capacity of 650,000 BPD; which a significant fraction shall reasonably cushion the effect on foreign exchange demand pressures for refined products’ imports (eventually amounting to a stage of self sufficiency in products’ domestic daily demands). If peradventure, the government decides to apply full support to all the local refiners (presently Dangote Refinery) through the already resolved sales in local currency; and implement a policy with dedication, through supply rate pegged at the annual national budget oil benchmark (by always ignoring developments in the world oil market), then such support and protection would open a surge window for local investors into the sector.

This strategy alone shall greatly improve the overall economy, at all levels (while the internally generated revenues shall cyclically recoup every discounted financials through taxation and levies within the economy). Space does not permit one to put the entire operational schedules in a detailed module, as it were.

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