A look into thoughts, statements and actions of Africa’s richest man, Aliko Dangote, over the past 2 decades, reveals an insight into his mindset.
Relentlessly pro-Nigeria and Africa in his business and economic outlook, Dangote has a simple but difficult to execute belief: that Nigeria cannot develop, unless it makes most of what it consumes and exports the excess, in a kind of made in Nigeria renaissance, similar to experiences of India under current President Narendra Modi and China since the end of the cultural revolution.
Speaking in an interview early last year Dangote noted:
“What we do at Dangote Group is to use our businesses to build the future of the business. When we were in Sugar, it was the Sugar profits that we used in building the cement. Now with the cement, we are building so many things with the profits, refinery, Fertilizer, petroleum products and petrochemicals.”
The path of least resistance for Dangote would have been to lay back and not take the kind of risks he is undertaking today with his massive $15 billion oil refinery and Petrochemical project currently nearing completion in Lekki, Lagos, including a $2billion Fertilizer plant at the same site, which began operations this year.
After all, his other companies, Dangote Sugar refinery made profits of N29.77 billion, while Dangote Cement booked N276 billion in profits for 2020.
By taking such a risk however, and in investing close to his net-worth of $17.9 billion (Bloomberg’s Billionaires Index, September 28th) in building one of the world’s biggest oil refineries, Africa’s richest man, is putting his money where his mouth is, and in the process drawing a line in the sand, over his grand vision for Nigeria’s development.
The 650,000 barrel-per-day refinery is just part of a $15 billion petrochemical complex that will also house a gas processor and the world’s biggest plant for ammonia and urea, which is used in making plastics and fertilizer.
An innovative infrastructure development-tax credit scheme, the Executive Order 007 2019, signed by President Muhammadu Buhari, known as Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme, allows private companies to construct federal roads across the country and be repaid in the form of tax credits.
This has seen the Dangote Group investing billions of naira to fix major roads and thoroughfares in the country.
The zeal to build factories in Nigeria (and Africa) by Dangote Group also has an ultimate goal, to create middle class jobs, amid an explosion of unemployment among mostly young people.
Africa’s population will double to 2.5 billion by 2050, and more than a billion young people will be looking for jobs. That could present a risk to the continent’s security, Dangote notes in numerous interviews.
But Dangote believes if more investors shared his view of Africa—as a source of future consumers as well as labor—it could also be a chance to bring lasting prosperity for all.
“There are enormous amounts of opportunities here (Nigeria and Africa) when you look at it,” Dangote says in an interview.
“But unless we stay and contribute to our own countries, we’re not going to get out of the woods.”
For Dangote, being the richest man in Africa is also not enough.
“I want to be known as the biggest philanthropist in Africa,” he says in an interview, citing Bill Gates-—whom he considers a friend—as a role model.
Dangote aims to have a foundation worth $10 billion within the next five to seven years. He has already invested $1.2 billion toward initiatives that focus on education, health and youth empowerment. Eventually he wants it to serve as a beacon for other charitable foundations to also invest in African causes.
With perhaps 10 years to go before hitting peak oil, Nigeria and other major oil producers are perhaps facing the biggest economic test in recent history.
GDP growth for Africa’s largest economy will hit 2.5 percent this year, according to the World Bank, one of the slowest pace of growth among major economies globally.
Dangote’s investments in Agriculture, Oil, Gas, Refinery, Petrochemicals, Fertilizer, Sugar, and other infrastructure, should help close the huge infrastructure, jobs and inequality gaps on the African continent.
Dangote Group’s audacious $15 billion refinery investment has the potential to revolutionize Nigeria’s economy, with its operations adding $13 billion, or 2.3 percent to gross domestic product (GDP), reckons a 2018 estimate by Renaissance Capital.
Central Bank Governor Godwin Emefiele has said that the project could employ more than 70,000 people when operational.
Consulting firm McKinsey has compiled a database of large companies with business in Africa revealing some 400 companies earning revenues of $1 billion or more, including Dangote Group with revenues of over $4 billion (N1.6 trillion) in 2020. Dangote Cement alone had sales of over N1 trillion in 2020.
Mckinsey in its report states that Africa’s relative lack of big companies matters not just for shareholders but also for society, because these firms are the primary drivers of economic growth.
“We might think of big companies as the baobabs of the business landscape: not only do they tower above the rest, they also have deeper roots and longer life spans,” McKinsey said.
“Like baobabs, large firms create their own ecosystems, fostering small-business creation through their supply chains and distribution networks. They are also better able to attract capital, which means they are much more likely to compete on the global stage,” the report said.
Dangote Group is doing exactly this for the Nigerian economy and in the rest of Africa geographic locations where it operates.
The two major listed companies of the Dangote Group (Dangote Cement and Dangote Sugar) paid a total of N113.08 billion in taxes in 2020.
To help the country surmount its economic woes, create jobs, and accelerate industrialization, Dangote Industries Limited is in the forefront of the government’s backward integration policy.
Interestingly, the company has been generating foreign exchange earnings for the country, thanks to copious investment in Sugar, fertilizer, and oil and gas.
For instance, Dangote Dangote Sugar Refinery (DSR) has spent N41.57 billion in pursuit of backward integration programmes.
Dangote Sugar, the largest producer of the sweetener in Africa’s largest economy with 70 percent share of the market, was commissioned in 2000, with an initial refining capacity of 600,000 MTPA.
It is actively investing in its operations; Savannah Sugar Company, its integrated production facility at Numan (Adamawa state) counts with installed factory capacity of 50,000 MT, covering 32,000 hectares with room for expansion.
Another backward integration project, Nasarawa Sugar Company Limited, located at Tunga, Awe Local Government Area, of Nasarawa State, along River Benue in Nigeria, has 78,000 hectares.
Cement Company saves Nigeria $3 billion annually
A few years ago, Nigeria was a bulk importer of cement in the world, but today it is self-sufficient in the production of the building materials, thanks to Dangote Cement, who is at the forefront of backward integration.
Dangote Cement Plc, the most capitalized company and largest producer of the building materials in the country, with production capacity of 29.24 Mta, has metamorphosed from backward integration to net exporter of the product, helping the government to save scarce foreign exchange.
As a result of the company’s consistent aggressive investments such as opening of factories across the country, Nigeria is saving $3billion annually for not importing cement.
Dangote $15 billion oil refinery is a game changer
The $15 billion oil refinery with capacity to process 650,000 barrels of crude daily, will be the largest single train in the world when it is completed in 2022.
The value of petroleum imports into Nigeria exceeded the value of exports by $58.5 billion within a five-year period, the latest figures from the Organisation of Petroleum Exporting Countries have shown.
Fertilizer Plant to bolster Agriculture
Dangote’s $2 billion Fertilizer plant, which has a name-plate capacity of 3 million tons a year of urea and ammonia, will be the largest in the world.
The President of Dangote Group, Aliko Dangote, told journalists during a tour of the facility that the plant will boost Nigeria’s economy by over $2.5 billion annually through foreign exchange savings and exports from the group’s petrochemical and fertilizer plants.
The figure is a fraction of the over $9 billion estimated to be saved for Nigeria annually from the Dangote refinery, petrochemical, and fertiliser plants by way of reduction in foreign exchange spending and other import-related costs.
Consolidating position as Africa’s greatest industrialist
The Africa Free Continental Free Trade Area (AfCFTA) has presented Dangote Group with an opportunity to consolidate its position as the largest producer of the building material on the continent.
Even before the cross-border free trade zone was conceptualized, the company was proactive as it has 10 plants across Africa. Also, it has been shipping products from Nigeria to other African countries.
“Apart from job creation opportunities, the exportation of clinker by Dangote will position the country to participate fully in the Africa Free Trade Liberalisation Agreement when it comes into being so that Nigeria will be protected against foreign products,” said Group Executive Director, Dangote Group, Alhaji Sada Baki.
The AfCFTA aims to create the world’s largest free trade area with the potential to bring together more than 1.2 billion people with a GDP of over $2.5 trillion and usher in a new era of development. It has the potential to generate a range of benefits through economies of scale, trade creation, structural transformation, productive employment, and poverty reduction.
The continent’s foremost businessman Aliko Dangote is of the opinion that Africa needs to deliberately improve its per capita consumption of cement in order to aid infrastructural development by stimulating further demand and forcing down the cost of the commodity.
“We need to trade with ourselves”, Dangote stated as he spoke glowingly about the prospect of the African economy, the free trade agreement and the availability of huge raw materials to attract investors.
Nigeria will also from this year become the biggest and only urea exporter in sub-Saharan Africa for the first time.
“And we are not only exporting, we are exporting big time,” Dangote said.