Hurdles we scaled to buy refineries, by Dangote
He is one of those being accused of buying up the nation’s patrimony under the immediate past Olusegun Obasanjo regime, particularly the Port-Harcourt and Kaduna refineries. But Alhaji Aliko Dangote has defended his role in the entire privatization exercise, saying those raising unnecessary dust, particularly over the refineries sale, are those who had benefitted tremendously from the endemic corruption in the oil industry. In fact, to him, the Nigeria National Petroleum Corporation (NNPC) stinks.
"The issue of refinery came during the recent government negotiations with Labour over the fuel price increase," Dangote told Daily Sun in an exclusive interview. "NLC was the first to bring in the refinery issue. But to our shock and surprise, government officials were very vocal in wanting to bring the refinery issue to the fore. They insisted the refinery issue must be brought into the negotiation. And that is why they refused to settle the crisis. They wanted the stalemate to degenerate so that government would then cancel the sale of refineries. So that it would be business as usual for those involved in oil business corruption. Fortunately for us, it didn’t degenerate to that."
Throwing more light on corruption in the oil industry, and NNPC in particular, Dangote, whose company has signed an agreement with the government to build a refinery in Lagos, which is the capacity of both Port Harcourt and Kaduna put together, said: "For the last eight years, the government has given NNPC about $700 million to refurbish the two refineries (Port Harcourt and Kaduna). That money wasn’t properly applied. And even after it was applied, the refineries are still not working. They are worth nothing."
Dangote says hurdles were deliberately placed in the path of his company to prevent it from buying the refineries by those feeding fat from the status quo. His words:
"There are too many people eating too much money right from importers, right from people within NNPC that are collecting bribes to allocate products. I am saying that because I know what I am saying. And I mean it. Collecting bribes to allocate products. The problem is, we have a troop of army of people, including people who are getting allocation of this and that. So everybody would come on board to fight us."
The industrialist also shed light on how and why most government owned enterprises like Aluminum Smelter Company (ALSCON), Ajaokuta Steel Mill, and others, were sold at almost give away prices. And of course, his personal worth, which he says is much, much more than the $1.5 billion credited by Forbes magazine to American talk show queen, Oprah Winfrey. The interview below:
I believe in Nigeria
Yes, I believe in this country. I believe there is always going to be Nigeria. My faith and belief in this country is unshakeable. We have to live together in peace and not in pieces. Why are we important in the world today? It is because of our population. Population and our oil. It is not because the world loves the name Nigeria. No. When was the last time you heard about Kuwait or Brunei? The importance of Nigeria is the market. The population is there. The money is there. It is just a matter of having good entrepreneurs who can push this thing forward. Look at our banking sector today. Banks like Zenith and co are opening branches in London and in Accra, Ghana and everywhere. But five years ago, you would never dream of all these banks getting to this size. Today, Zenith is almost $4billion market capitalization. These are things that we need to look at.
Richest man in Africa
I wouldn’t call myself the richest man in Africa. I would allow Forbes magazine to say so. But I have seen them saying Oprah Winfrey is the richest black person in the world, and she is worth $1.5billion. I think by the grace of God I am much, much, richer than her. But the other one about Africa, I would wait for Forbes magazine to come out with their rating. I think the picture would become clearer towards the end of the year. And they would publish by February. So we keep our fingers crossed.
Business role models
I like what some Indian companies are doing. Companies like Reliance Group and the Tatas. I think we have something in common with the Reliance Group. They think big and they do big things. For example, they decided to go into supermarkets and they are sinking $5billion into supermarkets. They have built a refinery of 660,000 barrels a day. It is a single refinery but the biggest in the world. And they are doubling the refinery. These are the kind of things that we are talking about. Ten years ago, they were not really that big. And in the ’70s, the person who really started the business, their father, Ambani, was a petrol attendant. He was filling people with petrol in their cars when they visited the station. He used to live inside a small apartment with his family. And he dreamt of building a refinery. He died three years ago, but he fulfilled his dream. My dream should be translated faster than his own. But the only thing is that he is playing in a bigger market.
On our part, Dangote is growing. The kind of level that we are playing today, we have passed the level of the food industries. Because food industries wouldn’t take much money. The field is a little bit smaller for us. We have to target the next areas which are oil and gas and telecoms where you need $3, 4, 5billion. If things don’t change, our investment target between now and the next four years is over $10billion. And I know that somebody would say even if you are putting ten percent, where is your $3billion? We are accumulating it and we have accumulated most of it. And we’ll get there. Even if there is a change in government, we’ll still do our business. We are not a company that is owned by government. People are still doing business in troubled areas like Congo. In fact, Congo is one of the best countries to invest in. During the war in Liberia, people were still doing business. A friend of mine opened a flour mills six months ago in Cote D’Ivoire. And Nigeria is better than all these countries. We are not fighting a war. Yes, we have the problem of Niger Delta, but this is a problem that we have to face head-on. And I think the current government of President Yar’Adua is trying to tackle the problem. I am very confident about the survival of Nigeria. My only fear is the Niger Delta crisis. Once we can solve that and deal with the power situation and we look at poverty, a substantial part of our problem would have been solved. I believe it is not only in Niger Delta that we have problems. Because if we solve the Niger Delta crisis, the next Niger Delta problem would be in the North where the poverty level is very high. There is the need to look at our agricultural policy again and see how we can go with a big heart and do something. And we should also make sure that we create some industries, because you can’t have a place where there is a lot of population and people are sitting down morning till night under the shade of trees.
Privatization: My story. NNPC stinks
The government did not spend $1.1billion to refurbish the refineries as some papers report. I know that fact. The papers are there. For the last eight years, the government has given NNPC about $700million to refurbish the two refineries—over a period of time. That money wasn’t properly applied. And even after it was applied, the refineries are still not working. They are still not working. They are worth nothing. That is No.1. No.2, we didn’t just get up and went to them and said: "Okay, this is how much we are going to give you." There are bidding process that took place. Credit Suisse have done their own evaluation, which is by far lower than what we have paid. NNPC have done their own evaluation, which is by far more than 40 percent less than what we have paid. These are the owners. They have done their own evaluation. And now BNP Paribas, which was also called in by BTE to come and also do evaluation, just a week before we bought the refineries. Both these two, their evaluation was low. When we went out to bid, No.1, there was this company Petro Plas or whatever consortium—a Saharan Energy. Their group came and they bidded $300million. But they couldn’t bring even a deposit. They were therefore disqualified. Oando bidded $200million. And they were asked to bring half of the money. Instead of $100million, Oando could only bring $80million. So they were also disqualified. We said $200million for the 51 percent and we put down our $100million. So we qualified. And now, we were asked to go back and bid again and come back with a new price. But because we know the sensitive nature of these refineries, there are too many people eating too much money right from importers, right from people within NNPC that are collecting bribes to allocate products. I am saying that because I know what I am saying. And I mean it. Collecting bribes to allocate products. The problem is, we have a troop of army of people, including people who are getting allocation of this and that. So everybody would come on board to fight us. When we realized that, we did not bother how much the refineries were valued at. We said, let’s go overboard. And we started with Port Harcourt where we agreed to put an enterprise value of $1.1billion. How much did the government spend in 1989 to build these refineries? Obviously there would be depreciation after these many years. Here is something that was run down. You don’t now go and recover your money. We paid the price of $1.1billion, because the $561million we paid for Port Harcourt is 51 percent of $1.1billion. We didn’t buy the whole refineries. The government still owns 49 percent. We only bought 51 percent. And 51 percent of $1.1billion is only $561million. That’s how we arrived $561million. In the case of the Kaduna Refinery, the Chinese which Nigerians don’t mind, if it goes to a foreigner, the Chinese were given juicy oil blocks. The day that they signed the production sharing agreement, that was the day that they said: "We are not bidding, unless we sign and collect the oil blocks." These guys signed and collected the oil blocks and they still priced the refinery at $102million. And they vowed they would not pay more than $102million. Then we said, fine, rather than allowing this thing to decay like that, we wrote to say we were interested also in bidding. The price that they gave was far below the reserved price. And now, we gave 60 percent more than the Chinese. And the Chinese said they were not going to put a dime more than $102million. We bought at $160million with all the challenges. But I thought this same refinery was given to Shell, to Chevron, to Texaco and they rejected them, saying they don’t want to even run them for nothing. And we have now paid over N100billion and people are shouting. I believe people should focus more on shouting about Eleme Petrochemical. Government spent almost $1.5billion and it was sold for $200million. And we bid. And we lost. And people didn’t see that. We bid for the same Eleme Petrochemical with a company that has never ever visited Nigeria. But because they are foreigners, they bought not even 51 percent, they bought 75 percent. And they were hailed. And they paid. And they got it. We lost as Dangote. And we spent more than $5 to 7million doing things like bringing experts to come and check and do diligence and all that. We lost our money and time. But Nigerians didn’t say anything because these are foreigners. That is by the side. The third point is that people bought Ajaokuta. Ajaokuta almost made Nigeria bankrupt. The government of Nigeria spent $4.4billion on Ajaokuta. And all these foreigners don’t bring their money in here. Majority of the money they borrowed locally. They didn’t bring fresh cash. And these same people paid a paltry $300million for 60 percent of a plant that government spent $4.4billion. Nigerians are not complaining about that. Instead they are complaining about our own. Because people don’t have interest in the steel industry. Delta Steel, government spent $1.45billion, then renovated it with 45billion and they sold it for 30million to be paid over three years. This one was also sold to an Indian company. They don’t have anything in Nigeria, but people now are not complaining. I am not complaining about the price these things were sold. What I am complaining about is that if you have to complain, then complain about foreigners taking our assets.
At ALSCON the smelting company, government spent $3.4billion. The Russians that have never ever visited Nigeria bought the company at $200million, with the condition that it is after the government dredges the river they would pay the $200million. And the cost of dredging the river is $260million. So you can see that government had to give out $60million out of their pocket to get rid of ALSCON. Because if not, the place would continue to go down, people would go and start cannibalizing the place. So government now said, "We don’t have any more money to sink in. Rather than continuously have this assets go under, it is better we even give them out for peanuts."
From my experience abroad, in some of the privatization, they would even ask you to pay one dollar, and you take over the company. Because when you take it over as a private person, you run it well, people would have a livelihood out of it and the place would work. You provide jobs.
Still on refineries, we have signed an agreement with the government to build a refinery in Lagos, which is the capacity of both Port Harcourt and Kaduna put together. We have signed an agreement with the Federal Government and we would get there.
Negotiation: Govt vrs NLC
The issue of refinery came during the recent government negotiations with Labour over the fuel price increase. NLC was the first to bring in the refinery issue. By the time that we sat down with them and convinced them, they agreed to take off the refinery issue. But to our shock and surprise, government officials were very vocal in wanting to bring the refinery issue to the fore. They insisted the refinery issue must be brought into the negotiation. And that is why they refused to settle the crisis. They wanted the stalemate to degenerate so that government would then cancel the sale of refineries. So that it would be business as usual for those involved in oil business corruption. Fortunately for us, it didn’t degenerate into that.