‘Nigeria’s economy at independence showed great promise’ – Dangote

This is part 2 of a series

Aliko Dangote was just three years old at Nigeria’s independence.  In many ways the path of Africa’s richest man maps the progress of the country’s economy since then. As he explains, his company, Dangote Group, has evolved.

While it started life as a cement-bagging company, it is now a proud proponent of ‘Made in Nigeria’. And his new refinery promises  to provoke a genuine sea change  in the country’s finances, preserving precious foreign exchange.

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The Nigerian billionaire talks to The Africa Report about what can be done to turn Nigeria into the industrialised powerhouse it should have been after independence.

Nigeria yesterday

TAR: How did the country lose its way, when it started off with such a promising mix of industry, talent and agricultural potential – why did it not become, say, Malaysia, where was the wrong turn?

Aliko Dangote: Prior to independence, cocoa, palm products, and groundnuts comprised 70% of all exports coming out of Nigeria.  Nigeria’s economy at independence showed great promise, with agriculture as the backbone of the three regions. In the Northern Region was groundnut, cotton, gum Arabic, in the West was cocoa and in the East, palm produce.

Post 1960, Nigeria’s predominance as an agricultural powerhouse continued with export crops as the country’s main foreign exchange earner. As at that time, Nigeria was first in export of palm oil and ahead of both the United States and Argentina in the export of groundnuts. The country provided 95% of its own food needs despite relying on subsistence farming methods.

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The founding fathers established a lot of industries and plants as a foundation to the nation’s economic wellbeing.  They adopted industrialization through import substitution to produce locally most of the imported goods. The discovery of crude oil in commercial quantities and the spike in its global prices was the turning point.

With rising oil prices and increasing demand, extracting and exporting crude oil became our dominant economic activity. The nation found it easier to earn more foreign exchange as well as funds from crude oil sales.

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The shift to oil created distortions as less attention was paid to agriculture and industries. The import substitution strategy suffered disruptions as there was abundance of petrodollars to finance import of various goods and services.

So the shift  was a result of the boom in the oil sector and the subsequent abandoning of advances made in the agriculture and industrial sectors.

Nigeria today

Given where we are, how can the country steer itself out of the pandemic-induced recession?

How we do business has been impacted by COVID-19. It has reshaped the business environment. Businesses that are capable of adapting fast are going to be absolute winners. The pandemic has accelerated digitalization of businesses and processes in Nigeria. Most meetings are now held online.  Digital platforms offer reduced costs in terms of movements, logistics, security etc. The ability to adapt shall determine winners and losers in the coming post-pandemic era.

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The private sector remains the engine of growth for the Nigerian economy. We need to have a Marshall plan, a special fund for the private sector, beyond any other government support initiative. The special fund will get the sector to play its crucial role in the reconstruction of the domestic economy.

The funds must get to the private sector and be monitored to ensure proper utilisation and achieve the intended results.

Government would also  need to ramp up efforts on economic enablers  in the economy such as improved infrastructure, consistency in policy, and constant dialogue between the private sector operators and the government.

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This makes for mutual cross fertilization of ideas and minimizes unintended outcomes . If these strategies are put in place and implemented, the  Nigerian economy will make it out of this COVID-19 induced  recession.

What are ‘recession-proof’ sectors that Nigeria needs to lean into? Agriculture? Industry?

One of the  major challenges in a recession is the reduction in purchasing power. The  purchasing capacity of the populace is vital to both the agricultural and industrial sectors. An economy like Nigeria can explore a hybrid of both growth avenues to experience a better rate of growth with improvement and modernization in both sectors. Agriculture provides food and many raw materials while industries are for the processing of the materials.

At Dangote Group, we are investors in both the agricultural and industrial sectors. We have embarked on the construction of a massive refinery in the Lekki Free Trade Zone. The project with a 650,000-bpd capacity, will be the world’s largest single refinery.

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The petrochemical complex includes a 1.2M mtpa polypropylene plant and a combined capacity of 3M mtpa Urea and Ammonia fertilizer plant.

At completion, the complex will create jobs for thousands of Nigerians, end the nation’s dependence on fuel import, and lead to the emergence of many allied industries dependent on the byproducts from the complex.

The fertilizer plant is set to be commissioned. Fertilizer is a major part of agriculture. We have sugar plantations and massive rice farms. We have sugar refineries that make use of raw sugar from our plantations.  This is backward integration in action. Our sugarcane plantations will be dependent on the fertilizer plant while the sugar refinery will be dependent on the sugarcane plantations.

Considering the fact that Africa was gradually becoming a dumping ground for cement by multinationals, whose investments were domiciled in Asia and the Far East, we took the strategic step of evolving from a cement bagging company to having integrated plants. The strategy was to make Nigeria self-sufficient in cement production; after all there are abundant deposits of limestone, a major factor in cement manufacturing, across Nigeria.  Through backward integration, we have ended the nation’s dependence on cement import.

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Dangote Cement has a combined installed capacity of nearly 49Mta capacity across the continent. We have a production capacity of 32.3Mta million metric tonnes per annum in Nigeria from three integrated cement plants – Obajana Cement Plant, Ibese Cement Plant and Gboko Cement Plant. The three plants have helped Nigeria to become self-sufficient in cement production and we now export cement to neighbouring countries. We have export terminals in Onne, Port Harcourt and Apapa.

Thousands of Nigerians are gainfully employed in these cement plants. The plants have also created hundreds of thousands of jobs as cement is the major material in the construction industry. New settlements and businesses are opening around the location of the plants. Many banks and other service businesses have opened branches near our plants helping to drive local economic development.

Therefore, I advocate that attention be paid to both agriculture and industry.

What kind of policy frameworks are needed to allow Nigerian businesses in these sectors to reach their full potential?

We need policies that curb smuggling and dumping of goods from industrialized economies. Smuggling and dumping like I always say, imports poverty and exports prosperity. The government must as a matter of precedence,  come out with clear cut policies that promote local industries and the intentional growth of the agricultural sector. There should be deliberate policies to promote the agricultural sector. Such policies include the revamping of agriculture settlements, provision of improved seeds and varieties and establishment of a mechanism to buy the products off the farmers.

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Policies for the industrial sector should include industrial clusters where factories providing ancillary services are located. For example, plants that produce tyres, wind shields, side mirrors and others should be established where motor assembly plants are located. On a general note, Policies to patronize domestic products should be encouraged.

Nigeria tomorrow

The jobs challenge for Nigeria is vertiginous. What are the low-hanging fruit, what are the medium-term challenges?

A major challenge for the Nigerian government has been efforts to address  the teeming youth population who need to be employed gainfully.  Nigeria’s growing population implies a growing market, and a major reason for investors to consider our economy as an investment destination. It also denotes an increasing workforce, which if well harnessed, will cause a turnaround for the economy. The youthful workforce should be equipped with the required skills to succeed in the market place.

Here in Dangote Group, we are aware of the need to provide the youths with the required skills and have put in place structures to accomplish this.  We established the Dangote Academy to provide fresh graduates in diverse fields with the technical competence needed to work in different units of our businesses.  We have also continuously provided skill acquisition trainings for youth in our host communities where they are trained in various fields to become more useful members of the society.

Are the prophets of the fourth industrial revolution barking up the wrong tree in Nigeria? Is the future not destined to those who provide products that the mass of Nigerians and the wider African market are interested in? And the technology for those is not complicated. Or should Nigerian companies be investing heavily in data management, to avoid being left behind?

The fourth industrial revolution is here in Nigeria. Nigerians are enterprising, innovative and adapt fast to changes driven by technology. Evolutions due to the fourth industrial revolution are already causing disruptions in the domestic economy.

The pandemic accelerated the adoption of digital platforms for business transactions in Nigeria.  Fintechs are emerging and providing value-adding services. Online commerce is booming and provides a seamless connection between service providers and end users.

Nigerian companies have already invested heavily in data management as they are an essential aspect of the modern economy.

This article is part of a special print edition of The Africa Report magazine: ‘Where is Nigeria (really) heading?’