John Dryden, a 17th Century English poet and literary critic, while painting a picture of the unscrupulous nature the politicians of his days stated that “Politicians neither love nor hate”. This description which highlights the emotionless, soulless, treacherous, and decidedly selfish nature of politicians, even till date, can be applied to businessmen. The brazen manner in which they pursue profit at the expense of everything wholesome and noble is comparable only to the shameless way politicians abandon principles in pursuit of power.
My rumination on Dryden’s statement in relation to businessmen was prompted by the report of multi-billionaire businessman, Alhaji Aliko Dangote, saying that he did not enjoy any incentive from government while building his $20 billion refinery. When the report first popped up on my phone, my first reaction was that he must have been misquoted. When the news began to appear on many other platforms, I decided to read various versions of it to understand the context of the statement. That was when I saw that in the same address at the Crude Oil Refinery-Owners’ Association of Nigeria (CORAN) summit, he had also called on the Federal Government to stop mortgaging the nation’s crude oil in forward sales arrangements.
On the surface, Dangote’s call for an end to crude oil forward sales sounded altruistic, especially in the light of the Norwegian example he cited where proceeds from oil are warehoused in a future fund for the benefit of generations yet unborn. But without even scratching below the surface, one begins to see the selfishness in the call. The real reason behind the suggestion, according to him. is “to ensure sufficient feedstock availability” for his refinery. In other words, what Dangote is advocating is: “Don’t sell to others so that you can have enough to give me”. You must not forget that the person making this call has issues paying premium price for Nigerian crude which is premium grade (it typically sells for about $2 or $3 above the other premium grade Brent)!
But that is just the tip of the selfishness and hypocrisy iceberg. The man who is sanctimoniously calling for an end to forward sales of the nation’s crude oil has suddenly forgotten that he is one of the greatest beneficiaries of the scheme. In 2021 when Dangote ran into a financial hitch in funding his refinery project, he ran to the Federal Government under the President Buhari administration for a bailout. The administration promptly charged the NNPC to work out something.
That was how the idea of stake acquisition in the Dangote Refinery by the NNPC came up. To raise funds for the bailout which had been structured in the form of stake acquisition, NNPC carried out a crude oil forward sale in which it raked in the $1 billion that was funnelled to Dangote. Three years down the road, the same man is up in arms campaigning against forward sales as if it is a crime. And all that because he stands to benefit from it through sufficient feedstock availability!
Beyond the selfishness in the call to stop crude oil forward sales, Dangote evinces shortsighted in not realizing that his interest in having sufficient feedstock availability is best served on a sustainable basis if there is sufficient funds for upstream operators to invest in the development of more oil fields to boost overall production. In the face of current global funding challenges, one of the easy ways of raising funds to invest in production is forward sales. Oil producing companies typically do this to raise funds to grow production. If they don’t have funds to invest in further production, the sufficient feedstock availability that Dangote, as a refiner, thinks he wants to secure would suffer as production would start to decline until it gets to a point where there will be no crude oil to supply to the refinery.
Dangote’s claim that he didn’t enjoy any incentive from government while building his refinery is nothing but egotism, selective amnesia, and crass revisionism on display. There is no one in his right senses that can downplay the fact that the successful execution of a huge project like the Dangote Refinery is a huge feat. In fact, almost every Nigerian is vicariously proud of the achievement. But to say that everything about the project was his personal effort without input any from the government is the height of needless egotism.
Perhaps, Dangote has forgotten that Nigerians are aware that he enjoyed huge import duty waivers on almost all the long lead items used in the construction of the refinery. He may have also forgotten that Nigerians are aware that when the dollar-to-naira exchange rate began its yo-yo dance during the President Buhari administration, he enjoyed a concessionary rate from the government without which the cost outlay for executing the project would have ballooned out of control. But all these do not amount to anything worthy of being acknowledged as incentive. Selective amnesia is the name of the game!
The involvement of government in the Dangote Refinery was further highlighted by the former Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, who at the inauguration of the refinery on 22nd May, 2023, announced that Dangote had paid of 70% of the loans acquired to finance the refinery project even before the refinery rolled out a drop of refined product. That Emefiele assumed the role of the Chief Accountant of Chief Financial Officer of the Dangote Group at that occasion is quite telling. One of the revelations by the former CBN boss was that the apex bank provided about N125 billion to Dangote for domestic currency requirements while also ensuring the availability of foreign exchange (FX) to pay for imported equipment. “Today, total loans outstanding have dropped from over $9 billion when this project started to $2.7 billion”, Emefiele stated. It is still a mystery as to how Emefiele got involved in the Dangote Refinery project to the point that a refinery that had not started producing had enough money to pay off 70% of its loans. If that is not incentive, then Dangote and God know what is.
Right from the conception stage of the Dangote Refinery, the Nigerian government showed sufficient interest in the project and did everything to support it to fruition. Dangote himself is on record as explaining recently that the Federal Government allocated two brownfield oil blocks to him which he was supposed to develop to guarantee feedstock supply to the refinery. This means that government was actually desirous to see him succeed without any encumbrance, even to the stage of feedstock supply. Ironically, the same person is taking the government to task on the forward sale of crude oil even though the same government made provision for him to have his own dedicated feedstock supply arrangement right from the very beginning.
It is difficult to understand Dangote’s concept of incentive. He needs to shed more light on the kind of incentive he wanted from the government that he was denied that warranted that comment. While we await his further explanation, it is expedient to let him know that he has no right to determine for anyone, least of all the government, how and where they should sell their crude oil. The Domestic Crude Supply Obligation clause in the Petroleum Industry Act (PIA) which he is harping on does not guarantee that anyone is under obligation to supply the entire feedstock need of his refinery. That is why it has embedded in it a willing-buyer-willing seller clause. If the producer does not have funds to produce and so does not have crude oil to sell, the buyer will have no crude oil to buy no matter how willing the producer is to sell.
If Dangote thinks that it does not require funds to produce the crude oil which he wants to refine, he should go and develop the brownfield oil blocks allocated to him and get feedstock rather than engage in cheap and senseless activism.
Ben Ekori, an energy sector and public affairs analyst, writes from Port Harcourt.
The article was originally published on Politics Nigeria.
