Nigeria’s largest oligopolies: Who are the actual beneficiaries?

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First got here Sugar… then Cement… now, petroleum refining. The cycle of in search of protectionist Backward Integration Policies to guard just a few gamers in restricted industries retains repeating itself. Only on this case, what ought to strengthen our collective economic system is defending just a few massive companies and shutting out others, due to this fact holding Nigerians to ransom.

Let us say it as it’s: We have seen this earlier than, with all types of ventures in numerous sectors. One of Nigeria’s largest businessmen units out to enter a brand new trade in a giant means. Government pulls out all of the stops to help the actualization of that dream with a number of incentives as a result of presumably, “it will support the economy and make the products/commodity more accessible and affordable.”

What has at all times occurred subsequent is that the government-backed backward integration plan is championed by this identical participant who is nearly at all times a primary mover within the non-public sector. What follows is a systemic closure of the working house to others begins to happen, amid in addition to a gradual improve in value. This is regardless of native manufacturing of a mentioned commodity going up. Why then does Nigeria maintain granting such insurance policies to favor just a few regardless of the advantages not trickling down as promised? Have these so-called backward integration programmes ever helped or accomplished so sustainably?

Let us check out the Nigerian Sugar Industry – a obtrusive instance of the success and failures of a protectionist Backward Integration Policy (BIP). Twenty years in the past, in the course of the then President Olusegun Obasanjo-led administration, the Backward Integration Policy of the Nigerian Sugar Industry was championed to make sure that the “big three” Sugar refineries – Dangote, BUA, and Flour Mills developed sugar plantations and had been in a position to make use of homegrown sugar to substitute imported uncooked sugar. This was supposed to deliver down the value of domestically accessible sugar in addition to deepen the Nigerian sugar trade. Has it labored up to now? Is sugar cheaper? Is the market extra accessible for smaller gamers?

Twenty years in the past, Dangote Group took over Savannah Sugar after buying it within the privatization course of. How have they fared? Many recommend Savannah Sugar could also be poorer for it. Asides from marginal investments in new sugar fields, nothing else seems to have been accomplished. To date, the plantation has acquired no main improve and nonetheless can’t produce white sugar as a result of it has no sugar refinery on website. About 5 years later, Flour mills of Nigeria, producers of the Golden Sugar model, took over their very own Sunti BIP website. Despite receiving over a 40billion Naira in FG intervention funds, their Sunti backward integration website nonetheless can’t produce edible sugar and solely has a sugar mill much like the one on the Dangote’s Savannah Plantation. The third producer, BUA is hardly any completely different. BUA took over its personal Lafiagi website 10 years in the past and didn’t begin on time in growing the positioning. They claimed it was because of the authorities not handing over the land and related infrastructure until 2014. Till date, work on their Sugar refinery and ethanol plant on-site along with its plantation continues to be a way behind – identical to the Dangote and Flour Mills, on delivering on their agreed BIP deliverables. Which severe corporations take one to twenty years to place the correct issues in place?

What has this led to? Prices of sugar have grown astronomically for the reason that BIP programme began, even hitting NGN25,000 per bag in the course of the COVID pandemic. It took a public outcry and the intervention of the federal government for costs to be diminished. Word on the road is that there could also be one other value improve in direction of the Muslim fasting interval. Why is it that sugar is at all times costly right now of the 12 months? Who shall efficiently regulate these omnipotent oligarchs? New gamers are discovering it tough to interrupt into the trade and people who attempt to are summarily pushed out.

To make issues worse, it appears there may be additionally oppression amongst our oppressors. Any of the gamers who attempt to break ranks is ganged up towards by the others, as presumably demonstrated by the latest debacle on BUA’s new export-focused sugar refinery within the Bundu Free Zone in Port Harcourt. A just lately leaked memo written by the 2 different gamers to the Minister of Trade urged the Minister to close down BUA’s operations in Port Harcourt, even though elevated operations would doubtlessly resolve supply-side points and by extension deliver down the value of the completed commodity – points – even when crucial duties are paid to deliver the sugar into mainland Nigeria. To put it in less complicated phrases – think about a sugar firm unable to satisfy its goal combating for the shutdown of one other, even when income is being expended to import sugar into mainland Nigeria. What hope then exists for the smaller producer or the shoppers, who bear the brunt of those machinations?

It doesn’t finish with sugar; Nigerians have witnessed the identical factor with the Cement Industry, with the identical forged of characters. Despite a sequence of waivers, pioneer standing incentives, and a backward integration coverage championed initially by Dangote Cement and later loved by Lafarge and BUA – the 2 different gamers within the Nigerian Cement Industry, retail costs of cement have grown astronomically in a means that makes on a regular basis Nigerians query the advantages of Backward Integration within the Cement Industry. In a latest interview, BUA Chairman Abdul Samad Rabiu who is a component and beneficiary of this method, sarcastically admitted that Nigerians are paying the very best for cement in most of Africa. His friends haven’t thought-about Nigerians worthy of listening to such reality, preferring to maintain mum.
I have to say, a Backwards Integration Policy mustn’t create extra unwieldy, extraordinarily worthwhile monopolistic enterprises that by some means find yourself holding Nigerians by the pocket and due to this fact by the jugular. Rather, such insurance policies ought to engender a extra open, aggressive trade, giving alternatives to all comers with out the concern of the system and some gamers irritating them.

At a briefing over the weekend, Nigerians had been shocked to be taught once more that considered one of these identical gamers who’s constructing a 600,000barrels per day petroleum refinery, is actively pushing for purchases of Crude in Naira in addition to a brand new backward integration coverage for refineries. This was kind of confirmed by the latest go to of the Senate Committee go to to the Dangote Refinery final week.

Here’s the clincher – the identical firm which has benefited immensely in different sectors to the detriment of Nigerian shoppers at the moment are requesting that this coverage ought to solely be prolonged to those that have ACTIVE refining licenses. What this implies – identical to in Sugar and cement, is that solely these corporations with energetic licenses will be capable to import these merchandise into Nigeria. This will successfully slender the marketplace for Dangote’s 600,00barrels per day refinery. In view of their present plans, the Dangote Group would be the solely ones to get pleasure from the advantages of this coverage and presumably, BUA, when its personal 200,000 barrels per day refinery comes up in 2024.

What is baffling, nevertheless, is that this coverage if instituted, will make sure that solely the same old elite group will be capable to import petroleum merchandise, identical to we’ve got seen in Sugar and Cement. It may also make sure that even our expensive personal NNPC might be pressured to purchase its refined petroleum merchandise from these corporations, guaranteeing unsustainable income and arbitrary price-fixing which is detrimental to Nigerians. Crude oil the world over is bought in {dollars}. Why will they pay for our crude in Naira after which promote it again to Nigeria in {dollars}? The identical factor will probably apply to BUA and these two corporations might as effectively be controlling over one-third of our GDP.

Here’s the clincher – the identical firm which has benefited immensely in different sectors to the detriment of Nigerian shoppers is now requesting that this coverage ought to solely be prolonged to those that have ACTIVE refining licenses. What this implies – identical to in Sugar and cement, is that solely these corporations with energetic licenses will be capable to import these merchandise into Nigeria. This will successfully slender the marketplace for Dangote’s 600,00barrels per day refinery. In view of their present plans, the Dangote Group would be the solely ones to get pleasure from the advantages of this coverage and presumably, BUA, when its personal 200,000 barrels per day refinery comes up in 2024.

What is baffling, nevertheless, is that this coverage if instituted, will make sure that solely the same old elite group will be capable to import petroleum merchandise, identical to we’ve got seen in Sugar and Cement. It may also make sure that even the NNPC might be pressured to purchase its refined petroleum merchandise from the businesses, guaranteeing unsustainable income and arbitrary price-fixing which is detrimental to Nigerians. Crude oil the world over is bought in {dollars}. Why will they pay 4 of our crude in Naira after which promote again to Nigeria in {dollars}? The identical factor will probably apply to BUA and these two corporations might as effectively be controlling over one-third of our GDP.

To rescue our nation, the Government should dispose of the true backwardness of those Backward Integration Policies, besides it ensures actually free markets. It has by no means labored for Nigerians. Rather, it has solely labored to assist just a few folks enhance their already fats pockets. At this fee and if left to subsist, Nigerians might probably find yourself paying triple for petrol as has occurred in Sugar and Cement. The Policy of backward integration as applied up to now has solely enabled a monopoly that strangles the nation’s probabilities at sustainably growing its commodities market and we should not mortgage our oil on this method. The authorities should power these oligarchs to take a seat down and renegotiate all phrases in these core industries as is being accomplished in different nations like Senegal, for instance.

Bottom line is, Nigerians and their stake within the oil trade seems to be heading in direction of a precarious finish. So I ask once more: BACKWARD INTEGRATION IN SUGAR, CEMENT AND NOW, PETROLEUM: WHO ARE THE REAL BENEFICIARIES? Certainly not Nigerians

 

‘Tayo Irantiola writes from Lagos Nigeria.

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