Dangote is winning again...cement, roads and taxes

So for those wondering what Dangote is really up to with that road deal he got, well here it is

1. Bought over 250 yellow machines (or Caterpillar) for his massive refinery, fertilizer , power and pipeline project in Lekki.

Site Plan of Dangote's Plant

2. Don't need to hire an Engineering, Procurement & Construction Contractor, so he partnered with one to create a new West Africa giant..so he found Saipem who was already having issues with the Federal Govt on Oil & Gas local content: win-win

http://www.vanguardngr.com/2015/04/dangote-saipem-seal-joint-venture-agreement-in-central-west-africa/

3. To further vertically integrate his cement empire, why not just do a cement road construction demonstration - more expensive but more durable, and try it on a PPP sort of like basis while not necessarily making crazy money. Call it marketing. Fashola agreed like any economist would. Few tax breaks for free but great road? You kidding me? Even you will take it

Site of Dangote Refinery, Lekki FTZ in 2015

4. After this demonstration, expect Saipem-Dangote E&C to bid for road construction concession based on the demo- using Dangote Cement and more or less annuitizing his current income from cement (like fixed deposit) in form of tolls we will be paying on such roads

Some of the hundreds of Yellow Machines
Dangote bought for the Refinery Project

Please don't call this monopoly. It is just smart business strategy. But some Dangote cement stock.  

While most analyst have raised concerns about glut in the local market, Mr. Dangote definitely have his own ideas about where his cement should be used. The excess capacity building up in Nigeria is going into roads. You read it here first


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Unintended Consequences and Unnecessary Pain

Unintended Consequences

Reading Punch Nigeria today, and one wonders if this subsidy removal policy is not beginning to have unexpected consequences. Punch had a story on consumers taking to public transport and abandoning their fuel guzzlers

Who said public policy cannot be used to shape private behavior? Let the season of waste in the midst of poverty end. Let us build a solid foundation for true economic progress. Our air will even be cleaner and cities more orderly. This fuel subsidy removal policy may have an environmental upside.Citizens now should also demand re-engaging our public transportation needs. They will pay more attention to infrastructure and force politicians to rebuild them. Instead of using fuel-guzzling SUVs fueled by wasteful subsidy to conquer bad roads, it is now cheaper to demand that roads be rebuilt by your politicians so you can use a small car and comfortable public transport.

Unnecessary Pain

The NBS figures didn't have to be this bad. Lots of inaction and bad action. We warned..so to entirely blame the previous administration is not exactly truthful. Many things could have been done to keep the nation away from recession given that the signs were clear and the economy was actually quite resilient. The government could have been assembled earlier, budget assembled quickly, quick action on subsidy taken, central bank policy path could have been different to take away the unproductive profiteering and flight of FDI & remittance due to the huge gap in exchange rage or ensure it doesn't even exist in the first place because of knee jerk reaction and monkey business pronouncements and lastly serious public sector reforms undertaken which by itself can be used to inject life to the economy by paying gratuities and pensions for those getting "packages"

To the right are growth rates depicted by quarter, up until end of last year the economy was resilient, so to blame the previous administration is actually not smart. APC came into office without a stimulus plan when a recession as coming. Obama passed his stimulus plan and package of reforms and spent the entire good will from getting newly elected on that. It paid off. Our own president spent it listening to sai Baba rankadede, and getting deceived by evil servants even to the point of thinking refineries were miraculously revived. This was the problem.

Never too late to fix it..start with changing direction on monetary policy as they've done on subsidy regime.

Nigeria's Persistent Fuel Crisis: Who wanna be a Magician?

The guy is not a magician. He was being honest. He met 4 trillion of debt, mostly owed to cronies that supplied nothing and unverifiable but still legal debt cos NNPC staff were getting settled. The place is literally full of demons. From security guard to GGM, settlement is the culture of NNPC. The alternative was to ignore this and throw caution to the winds..but in the tight knit petroleum industry, it wouldn't matter. NNPC could not default on its "obligations" no matter how poorly contracted. In certain parts of NNPC, it requires 42 different officers/managers to approve an invoice. Just imagine that. Each an opportunity to "collect". 

In the Mean time, the entire asset of the organization was comatose. 30 of 33 depots/pump stations have not received product for years some since the time of Abacha and there was no plan to use them. Only about 720km of 5120km PPMC pipelines was even serviceable. 

(Side note: Even if refineries can work by miracle wand, they supply just half of Nigeria's needs meaning 900,000bbl is required to be supplied to them instead of their designed 450k bbl/day. It will mean that all federation crude will purely go to domestic consumption at under par prices.  This is a technical problem which a senate hearing cannot solve but have real consequences for the revenues of our 37 parasitic federating units. )

Warri-Escravos pipeline that supplied crude to Warri and onward to Kaduna refinery have not been used in 5 years while PPPFM a crony company close to Diezani ripped Nigeria off on shipping contracts to deliver crude to Warri when it was not even producing.  So they deliver, evacuate and charged us for nothing for 3.5 years! PDP continued to import and abandon pipeline because the alternative was more expensive and they can make quick bucks. Imagine using ships to transport crude instead of pipeline. Using coastal jetties and trucking instead of depots connected with pipelines to the hinterlands. Addiction to Importing instead of refining when oil price were at its highest and we could afford to fix our refineries. Instead PDP racked up subsidy bills and allowed cronies to deliver phantom PMS for which they got paid for doing nothing. Others got dubious crude swap contracts that saw expensive crude being exchanged for a basket of products of dubious formula .

In short, All the operational choices were more expensive and equally unreliable. If an importing entity don't secure a ship for an international import cargo of petrol in minutes on a typical day, it takes another 2-3 weeks to get another one of similar spec as the market moves 2-3 weeks in advance and "subjects" get lifted as quickly as they appear (midstream terms - pardon me) . So one mistake or indecision and the entire country is screwed..even one by a starting junior officer acting for a boss on vacation. A simple decision on vessel programming suddenly determines if the entire country is thrown into panic buying and economy goes comatose because they (PDP) took the easy money route to plan our energy economy.  This is the country Obasanjo and PDP gave us..It started under him and he created the monster - to sponsor elections and win by all means. Lets be honest. 

Now the kicker..

And those guys have the money which translates into power to sabotage noble efforts to even fix this mess whose scope and magnitude you can't even begin to imagine. 

In reality, this long problem have an not so easy fix (thanks to union). Break up NNPC, spin off the business units and assets to private sector investors, et al. But even that requires time. Cleaning up the books and assets!

Another not so easy fix for the queues was to throw open the sea borders and allow anyone bring in fuel and sell at any price they wish. Similar to Kenya where they don't produce a drop of crude yet have no single line for petrol. Let's even make it temporary and remove duties to lower end user price . Make it the only product you can import for 18 months without duties until the refineries start working? But that was not an easy pill for Aso Rock Villa. The mentality of Petrol being the rights of Nigerians even if they have to die in scarcity and want persists. 

Now are you the magician? Solve this problem!