Simon Kolawole: Industry and the Nigerian Project

by Simon Kolawole

Maybe there is something about the Nigerian market that we don’t understand. This is a country plagued by poverty, yet the people are very hungry to make phone calls!

Let’s say I have $10 billion “change” and I don’t know what to do with it, why should I invest it in Nigeria? Patriotism is not enough. It’s a business decision I have to take. It’s not about sentiments. I have to look at the market, the costs and the political environment. Why should I put my money in an economy where a large percentage of my cost would be on diesel? Why do I have to build roads and drainages, provide my own security and battle with the demons in government who want me to part with bribes before I can get necessary approvals? Why should I invest in a country where policies are changed and goalposts shifted every so often? On the surface, Nigeria should not be a place for any rational human being to invest, even if he has $10 billion to burn.

But, on a second thought, Nigeria may actually be the place to invest. We are complaining and grumbling but those who understand the meaning of opportunity are making money right under our nose, while our people are running abroad to wash toilets and dead bodies. For instance, MTN became the biggest network in Africa because of its Nigerian market. Agreed, they are spending enormous sums on buying diesel and building infrastructural backbone that should have been provided by the national carrier. But they are still making billions of dollars yearly. Maybe there is something about the Nigerian market that we don’t understand. This is a country plagued by poverty, yet the people are very hungry to make phone calls! Obviously, a market of 160 million people has something to offer.

Before I proceed, I would like to comment briefly on an advertorial published by Dangote Sugar Refinery (DSR) during the week, explaining why sugar prices have dropped. According to the company, all raw sugar refined in Nigeria is imported from South America (Brazil is the world’s biggest producer). The price has dropped from 26 cents per pound to 19 cents. To pass the benefit on to the consumer, DSR last month reduced the price of a 50kg bag from N8,600 to N6,600. In response to their competitors’ claim that they were damaging the market with the price drop, Dangote said it would even make bigger profit this year with the lower prices. Indirectly, DSR is telling its competitors to also reduce their prices in response to the falling cost of raw sugar. After all, DSR said, its competitors are still enjoying tax holiday as new investors in the sector.

There are certain points I picked from the advertorial which should help our discussion today. One, the company said it paid a total of N20.25 billion as taxes to government in 2012. Ironically, according to the sugar refinery, the taxes were almost twice what the company made as net profit (N11 billion). That means the government made more money from the business that the company itself. This indeed suggests that if industry works in Nigeria, government stands to derive a lot more tax revenue. All the talk about growing non-oil revenue starts from here. If one manufacturer is paying N20.25 billion in taxes, imagine what a thousand firms could pay! Also, industry can employ far more workers than oil. Exploration of oil is highly specialised and only a few experts are core to the business, compared to manufacturing which has a more expansive, downstream base. The production link between agriculture and industry also means we can create millions of jobs and enhance the value chain.

Two, Dangote Sugar says it is passing the benefit of lower sugar prices to the consumer. At a point in time, sugar was N9,600 per 50kg bag because of the input costs, particularly the price of raw sugar. Now it is down to N6,600, with all the beneficial implications for bakeries. This reminds me of the oil industry. Federal Government has always promised us that if the downstream sector is deregulated, Nigerians would eventually enjoy the benefits of lower fuel prices as the market forces interplay. Unfortunately, when crude oil prices dropped to as low as $40 per barrel in 2009, the benefits were not passed on to the consumers. Petrol price remained at N65. If the government had reduced the price at that time, Nigerians would have been put in a position to believe the projection that deregulation could lead to lower fuel prices. But the pump prices remained same, apparently because government wanted to recoup some of the money spent on subsidy. It was a big opportunity the government missed in its deregulation campaign.

I will now make my point. If the Nigerian project – that is, conquering the misery of economic and political underdevelopment – is to be viable, we must get our industrialisation right. We need to encourage massive investment in agriculture and manufacturing. There is no country called “developed” today that is not industrialised. We are wasting too much energy discussing state creation and power rotation because of the oil money, whereas what would benefit Nigerians is economic prosperity driven by using what we have to get what we want. Millions of Nigerians are jobless. We have enough agricultural and industrial potentials to transform the economic structure of Nigeria and reduce the craze for political appointments and crime. While oil money goes into the coffers of government and fuels corruption, profits from industry create real private wealth. With the right policy direction and infrastructural support, industry will grow. We can have a thousand more Dangotes.

I had a long telephone chat with the Minister of Trade and Investment, Dr. Olusegun Aganga, yesterday. He gave me some cheery news: Nigeria will start to export cement in the next two months. He revealed that the country now has an installed production capacity of 28 million metric tonnes, while local demand is about 20 million metric tonnes. “The backward integration policy in the cement industry is one government initiative that has worked very well,” he said. He also spoke on the National Industrial Revolution Plan geared towards repositioning Nigerian industries, especially where we have “comparative and competitive advantage”. These are: agribusiness (food processing, palm oil, leather and leather products, textile and garment as well as sugar sub-sectors); mining-related industries (cement, iron and steel, aluminium and automobile sub-sectors etc); oil and gas (petrochemicals, plastic and chemical industries), construction and housing sectors.
I don’t doubt him – but it is results that will really count at the end of the day.


And Four Other Things…

I hope our lawmakers are taking note of the constitutional crisis in Venezuela. President Hugo Chavez won another term in office but because he is undergoing treatment for cancer, he could not attend his swearing-in last Thursday. The Venezuelan constitution did not envisage this. As our lawmakers seek to amend the constitution, they must take this into account in case it happens here. Section 136 of the 1999 Constitution only envisages a permanent inability to be sworn in, not an ailment. Also, how long can a governor or president be away on sick leave? The ongoing Taraba and Enugu sagas were obviously never envisaged by the law.

God, let it be true that a Nigerian scientist has found a possible cure for HIV/AIDS! The emphasis is on the Nigerian. We are known globally for 419 and Boko Haram.  Many have concluded that nothing good can ever come out of this country. The new therapy for HIV/AIDS unveiled by researchers at the University of Benin is yet to pass through all the necessary procedures for it to be accepted as genuine, but I think too much negative publicity is already being generated around it, which is very bad. What should ordinarily be a source of celebration is now being turned on its head.

Edo State Governor, Comrade Adams Oshiomhole, could not hide his disappointment with the police over the handling of the investigation into the murder of his former private secretary, Olaitan Oyerinde. He vented his frustration at the launch of the code of conduct for the Nigeria Police Force last week. The Inspector General of Police, MD Abubakar, has described Oshiomhole’s allegation of police complicity as “baseless”. However, if a sitting governor could be so frustrated in his attempt to get justice done, can you imagine what millions of Nigerians, who have no voice or influence, are going through?

Last week, I commented briefly on the misguided campaign to tax churches. I argued that for as long as churches are registered as charities or non-governmental organisations, you cannot single them out for tax. I want to add that if we have problems with pastors living flamboyant lifestyles, there is nothing saying they shouldn’t be taxed. Even Jesus himself paid tax! Our grouse, it seems, is with the operators of the churches, not the churches themselves. Therefore, we should focus our energy on the pastors, not the churches. We cannot make a law to single out churches for tax. Never.



Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija.

One comment

  1. I always enjoy reading your features because they are all encompassing.They always remind me of my late lecturer Dr.Bala Usman (ABU ZARIA) as you digressed from industry to politics and administration. Sarcastically, I wish we will soon have MONPA STATE……..

Leave a reply

Your email address will not be published.

cool good eh love2 cute confused notgood numb disgusting fail