Pages Navigation Menu

Nigeria news, headlines, events , stories and all that is trending today

Why Aliko Dangote is a Strategic Economic Pillar

 

Crusoe Osagie examines a recent declaration by President Muhammadu Buhari that Dangote is one of the most strategic investors in Nigeria and profiles some of the investments which may have led the president to draw this conclusion

Recently, President Muhammadu Buhari described Aliko Dangote, President of the Dangote Group, as one of the most strategic investors in Nigeria and Africa.

Knowing that Buhari is hardly a leader that wastes words, it is clear that the president carefully considered all Dangote’s investments in the country and their relevance to the survival of the economy before arriving at that conclusion.

The president last week called on other investors and countries in Africa to consider the strategic nature of investments made by Dangote Group and General Electric (GE), among others, asking them to take a cue.

Buhari made the statement when he opened proceedings last Monday at the sixth African Petroleum Congress and Exhibition (CAPE VI) held in Abuja by the African Petroleum Producers Association (APPA).

The President, who was represented at the event by Vice-President Yemi Osinbajo (SAN), identified some of the companies adding the most value to the Nigerian economy through their ingenious investment as GE, Dangote Group, Ladol Shipyard and Samsung.

According to the president, African countries should develop ingenious ways of promoting value addition and investments through sustainable policies in local content.

He added: “A common approach to local content will ensure that the whole of Africa benefits from economies of scale associated with our vast resources.”

Buhari noted that ongoing mega projects like the General Electric service centre for manufacturing rotating equipment in Calabar; the Ladol industrial free zone in Lagos – a wholly indigenous, privately developed and hosting the largest shipyard in West Africa; the 650,000 barrels per day (bpd) Dangote Refinery in Lagos; and the Samsung FPSO integration yard in Lagos, are some of the most strategic investment to an African economy.

He stressed that the continent must recognise that the development of domestic refining capacity in the oil and gas sector would remain critical to sustainable economic growth.

Petroleum Refining Effort

Dangote Petrochemicals’ 650,000 barrels per day (BPD) capacity petroleum refinery which will come on stream by 2018 will deal a major blow to the status quo of import dependence.

Senior manager, civil and structural, Dangote Petrochemicals Ltd, a subsidiary of Dangote Group, Madhav Kelkar, recently noted that when the refinery comes on stream, it would boost the country’s refining capacity and enhance industrialisation.

He said construction work on the projects was expected to be completed by 2017 while refining operation would commence by 2018, adding that the project would create job opportunities for Nigerians.

“The 650,000 barrels per day capacity refinery will meet the 2018 deadline,” he said. “As you can see, piling and land reclamation are going on. Sand filling is the most critical part of the project and a Belgium-based dredging company called Jande Nul is in charge of dredging and soil investigation.

“Assembly and coupling of equipment will take only a couple of months. I think we are making progress and I’m happy with what we have done so far.

“At the end of the day, every Nigerian will be very proud that we have the longest single train refinery in the world. That’s the vision of Dangote.’’ Kelkar said when the project is completed, Nigeria would be self sufficient in refining of crude oil.

He said more than 2,000 Nigerians would be employed when the refinery commence operations.

He said the petrochemical plant would produce 750,000 metric tonnes of polypropylene per annum while the fertiliser plant would produce 2.8 metric tonnes of Urea and Ammonia.

Cement Independence

As for cement, Dangote’s determination essentially drove other operators in the country to embrace the idea of genuinely pursuing the cement self-sufficiency vision of the federal government, which has since been achieved.

Dangote Cement Plc is a subsidiary of Dangote Industries Limited and is the largest company traded on the Nigerian Stock Exchange. In 2013, the company produced and sold 13.3 million metric tonnes of cement, with revenues of US$2.4 billion. As of 2014, Dangote Cement had a market capitalisation of $20 billion. In 2012, Forbes Africa named Dangote Cement as one of the top five listed companies in West Africa.

The company is by far Nigeria’s largest cement producer with three plants in Nigeria and 13 other African countries. The company is a fully integrated quarry-to-depot producer with production capacity of 19.25 million metric tonnes per annum (mmtpa) in Nigeria. It has further built over 19mmtpa of production, grinding and import capacity across Africa, which became operational by the end of 2015.

The Dangote Cement plant in Obajana, Kogi State, is the largest in Sub-Saharan Africa with 10.25mmtpa capacity across three lines and a further 3mmtpa capacity currently being built. In 2012, the firm opened a $1 billion cement plant in Ibese, Ogun. The facility is capable of producing 6 million metric tonnes of cement per year, raising the company’s total production by 40 per cent at the time.

The plant was installed by the Chinese construction and engineering firm Sinoma, and represents one of the largest non-oil investments in Nigeria. The company’s plant in Gboko, Benue has 3mmtpa capacity with an upgrade to 4mmtpa planned in 2013. A plant in Senegal also opened in 2015.

Also, Dangote has commenced arrangement to set up a 3 million mmtpa cement plant in Okpella, Edo State and another 6million mmtpa in Itori, Ogun State, both to raise the Nigerian cement output of Dangote to 29.25 mmtpa.

Rice Intervention

Between 2005 and 2015, Nigeria’s monthly import bill went up from N148 billion to N917 billion. Paradoxically, most of the items Nigerians import are needless items and things that can be produced locally. The crash of the crude oil price which, has remained the main foreign exchange earner for the nation, has now laid bare the helplessness of Nigeria as a monolithic import dependent economy.

With crude oil not able to sustain the economy anymore, the attention expectedly is shifting to agriculture, which decades ago was the propeller of the then buoyant economy. This is one of the reasons Dangote made a foray into productive agriculture. Recently, he launched his Dangote Rice Outgrowers Scheme in Hadejia, Kafin-Hausa local government area of Jigawa State.

Starting with 20,000 hectares of rice cultivation under scheme known as outgrowers, to be expanded to cover 800, 000 hectares over the next three years, Dangote said time is now to turn to agriculture to save the nation’s economy.

The business mogul commenced the scheme with the distribution of treated rice seedling for planting to some 5000 farmers expected to participate in the scheme.

He explained: “We are committed to the development of Outgrower scheme by providing local, value added products and services that meet the ‘basic needs’ of the populace. To this end, the Dangote Rice Farm Ltd, will run an initial pilot in Hago-Fadama, Kafin Hausa and Auyo areas which would see Dangote Rice developing small hold farmers by providing quality inputs (certified seeds, fertilizers, agro-chemicals and petrol), improved agricultural practices and technology to increase yield and produce quality rice paddy which would also be bought back from them by Dangote Rice Limited. The Outgrower programme in Jigawa state is expected to create more than 10,000 direct and indirect jobs to the host communities.”

Over the period, aside the out growers aspect of the investment, he explained, Dangote Rice is planning to plant approximately 150,000ha of long grain white rice and produce near one million tons of high quality par boiled white rice for sale into the Nigerian market.

“Our internal policy within Dangote Rice Ltd is to procure 30 per cent of our Rice production from local farmers who will be developed into outgrower groups. These Outgrowers will be simultaneously developed alongside our commercial farming operations.”

Why Rice?

Dangote said: “Before the discovery of oil, our economic was built around potentials from our palm oil, groundnut, cotton, and rubber plantations. Now the price of oil has plummeted from a peak of $116 per barrel in June 2014 to as low as $29 per barrel in January 2016, this means there is huge loss of revenue to the government.” He said Nigerian agricultural commodities and food imports bills has averaged over N1 trillion in the past two years in 2013 and 2014, with foods like sugar, wheat, rice, fish accounting for 93 per cent of the total cost of imports, a situation he described as unacceptable for anyone who loves the country.

He justified his investment in rice cultivation pointing out the situation the country had found itself needs a reversal. According to him, Nigeria spends nearly $1.8billion per annum importing approximately 3.2 million MT of rice to feed its population. These are dollars that could be used on more impactful social development interventions if they were not needed for food imports. Currently the average yield of rice in the country is between 1.8 to 2.5 MT/ha, depending on the region and the crop (wet or dry) and with or without irrigation 1.8 MT/ha, which is significantly lower than the best practice yields in Africa of 9.2 MT/ha generated in Egypt. Locally produced rice is more expensive than imported rice due to the high cost of production relative to the low yields in the country because of poor agronomic practices. In addition the Government of Nigeria has implemented policy incentives that encourage investment in domestic rice production and milling.

He regretted that the huge amounts were being expended on food items that the country has potential to produce locally with attendant losses of employment generation and wealth creation opportunities. “Yet the allocation of foreign exchange to import these items depleted the foreign reserves continually.”

Dangote disclosed that the Dangote Rice Outgrowers Scheme has been designed as a one stop solution for the rice value chain.

In his remark during the rice seedling distribution, Minister of state for Agriculture, Senator Heneiken Lokpobiri, lauded the initiative of Dangote, saying his intervention in the government efforts at providing food security for the citizenry, creating jobs and reducing dependency on food importation are being boosted.

According to him, a whooping sum of $20 billion is spent on importation of food items that could be produced locally, a situation he said Dangote Rice investments would help ameliorate.

Ending Tomato Paste Importation

The much awaited Dangote tomato paste factory in Kano State, has commenced operations in an attempt to curb the importation of tomato pastes into the Nigerian market, through which $1.5 billion is frittered annually.

The $20 million facility, which is the size of 10 football pitches set within 17,000 hectares of irrigated fields, will directly employ 120 people. It is also expected to produce about 430,000 tons of tomato pastes annually, which is a significant ingredient in most local Nigerian dishes such as Jollof rice, stew and many soups.

This plant will help save tons of tomatoes from rotting away in the Nigerian market. According to the country’s Ministry of Agriculture, Nigeria produces about 1.5 million tons of tomatoes a year, but over 900,000 tons is lost to rot. This is obviously a huge sigh of relief for farmers in Northern Nigeria where this crop is grown the most. However, the Dangote Group, owned by Africa’s richest man, has said that the company will buy tomatoes from farmers who grow this crop in large quantities. This is because the factory requires a huge supply of tomatoes to be functional.

This post was syndicated from THISDAYLIVE. Click here to read the full text on the original website.

Do you something awesome to share with the world? Click here to share

Do you ever have any question about anything you wish to ask and get answer? Click here to ask

Follow us on twitter @NigeriaTodayNG

Also, Like us on facebook

Comments

Be the First to Comment!

Notify of
avatar
wpDiscuz

Notice: Trying to get property of non-object in /home/nigtoday/public_html/wp-content/plugins/jetpack/modules/gravatar-hovercards.php on line 238
Download the Nigeria Today app from Play store. Click here download now
Hello. Add your message here.