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Why Aliko Dangote is bad for Nigeria

Aliko Dangote

The black nation celebrates Alhaji Aliko Dangote as an epitome of business ideas and acumen. It is not in doubt that he remains the richest African and probably the richest black man on earth.

But one man defers. His name is Feyi Fawehinmi, an  economic analyst, revealing evils of monopolistic tendency in an environment that does not encourage competition.
In effect, he opines that despite all the hype around him, Dangote is bad for Nigeria.
Here are some of his key taking points;
Dangote has made more than 90% of his wealth from the cement industry. He currently has a 65% market share meaning that in effect, he decides what the price of cement in Nigeria is.
The gross margin on Dangote’s cement was as high as 70% a few years ago and has slowly come down to just under 50% in 2016.

While average cement profit margins around the world was 17.2% in 2015, Dangote reported a 42.3% margin, almost 3 times more than the global average.

In 2013, Dangote cement had the highest net profit margin among the world’s top 15 cement producers (52%). The next most profitable producer had only a 17.8% margin.

Despite these statistics, the monopoly is set to continue. Dangote has 90-year mining licenses for materials like limestone even though its cement plants have a 50-year life span. So, he can afford to mine limestone for the rest of his life without paying a single kobo extra to the FG.

For those who are usually swept away by the ‘keep-Nigerian-money-in-Nigeria’ anthem Dangote sings, you’d be surprised that the FG is making so much of a public gain from Dangote’s activities.

Between 2010 and 2015 when Dangote cement earned around 1 trillion naira in profits, it paid only 12 billion naira in taxes, just a 1.2% tax rate.

This is due to “Pioneer Status”, a Nigerian arrangement that is supposed to encourage investment in industries which the Nigerian government deemed in need of support.

How Dangote’s three cement plants can claim pioneer status 10 times in 11 years within the same industry is baffling.

All in all, what Dangote has contributed to Nigeria through his cement factories are a lack of innovation, very few jobs, little addition to government revenue. And billions of dollars into the Dangote coffers.

Basically, in his opinion Dangote is bad for Nigeria.

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