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Statist tendencies, unfriendly environment hindering Nigeria from replicating MTN, Dangote, other successful businesses

In recent times, Nigeria has been unable to recreate successful companies such as Dangote Cement Plc, Seplat, GTB, MTN and others, which by virtue of business-friendly decisions by government at some point, have been able to take advantage of opportunities to rapidly grow, become success stories, and contribute to economic development.

While in the last four years, Nigeria has pursued improvement of its ranking in the World Bank Ease of Doing Business, the growth on that index has not been reflected in the economy, much less ease of operations by local businesses. In some cases, it appeared government agents were out to kill businesses that even employed thousands of Nigerians.

As analysts have noted, for Nigeria to create new successful companies; the likes of Dangote, MTN and others, government has to do away with the notion that it is the best manager for commerce and business. Rather, the private sector should be supported with the enabling environment to thrive, grow and support economic development.

“Where the government is just scared of free market and elite, the likes of MTN, Dangote or other big businesses cannot emerge,” said Bongo Adi, a senior lecturer of Economics at the Lagos Business School.

At the end of May, the performance of stocks listed on the Nigerian Stock Exchange (NSE) was the best in 15 months courtesy of Dangote Cement Plc and MTN Nigeria Communications Plc, the market’s biggest firms.

Dangote at the close of trading of Friday had a market capitalisation of N3.22 trillion while MTN closed at N2.77 trillion. Yet, MTN has been the victim of government’s harassment in recent years, despite being the most successful and biggest non-oil investor in Nigeria till date.

Both MTN and Dangote represent in a way, beneficiaries of two government policies that sought to create thriving industries, expected to result in generous contributions to economic growth and job creation. Since the return to democracy in 1999, some of the successful companies in Nigeria today enjoyed government’s policies that allowed private sector players to drive economic growth. Under the current dispensation, even in spite of the ease of doing business chant, free market is in reality frowned at and viewed with suspicion.

In the year 2000, Dangote Industries acquired Benue Cement Company from the Federal Government as part of its privatization exercise. BCC operated a 0.9Mta plant in Gboko, which was subsequently upgraded by the Group to 2.8Mta. This acquisition at the time would not have happened if the government was statist-inclined and not business-friendly.

In 2004, the company commenced the construction of the Company’s first cement production plant (Obajana Cement Plant). In 2007 the Obajana Cement Plant was commissioned with two production lines and capacity of 5 million tonner per annum, making it the largest plant in Sub-Saharan Africa.

In July 2010, the company’s name changed from Obajana Cement Plc to Dangote Cement Plc, by October of the same year, it listed on the Nigerian Stock Exchange following merger of DCP and BCC. Today, Dangote is the most valuable company on the Nigerian Stock Exchange. The journey to its current position may have been thwarted if government policies did not favour the need for privatisation, instead of wasteful state-run enterprises that continually post negative results.

As Adi explained, the major challenge of Buhari government is the socialist attraction it has. “They are worsening the situation by creating perverse incentives to moral hazards, inculcating the culture of laziness and slothfulness in the system,” he said.

These have a way of demoralising work and productivity, and are the greatest danger to having a thriving economy. Yet, unemployment remains unchained; rapidly climbing up even as the population expands faster the economy is growing.

According to the Q3 2018 report on unemployment rate as compiled by National Bureau of Statistics (NBS), unemployment in Nigeria has risen from 18.8 percent in Q3 2017 to 23.1 percent in the third quarter of 2018, estimated at 21 million people. The unemployment situation is dreadful, particularly when the increasing rates of insecurity across the country are put into consideration.

Even the manufacturing sector that should ordinarily be able to absorb a substantial portion of the workforce is bogged down with myriads of challenges from electricity, to multiple taxations and lack of infrastructure to support production.

Of these, electricity particularly stands out with about 40 percent of manufacturers’ expenditure spent on alternative energy sources such as fuel, diesel, gas, low-pour fuel oil, coal and inverters as they grapple with incessant power disruptions, which cripple production activities. As long as this situation persists, it is impossible to imagine new companies springing up, much less becoming successful.

According to the Manufacturers Association of Nigeria (MAN), paucity and high electricity tariff have posed dismal challenges for Nigeria’s manufacturing sector over the years.  reports have noted, many multinationals no longer rely on power distribution companies as they see the DisCos as unreliable.

Nigerian manufacturers have complained about franchisers of natural gas that dollarize payment of the energy source and selling to them at $7.45 per standard cubic meter (scm), which is above the international price of $2.5. Till date, government is yet to champion and enforce compliance with the basic and logical expectations of pricing, which is commensurate with what obtains in the international market.

Guaranty Trust Bank, Nigeria’s most valuable bank by market capitalisation, prides itself with introducing online banking and SMS banking in Nigeria. GTB’s growth is largely attributed to how it has used technology, particularly in the subset of telecommunication to expand its frontiers. However, if government had not at some point deregulated the telecoms sector, it is doubtful GTB would have grown to its current status by relying on the now defunct NITEL.

For Nigeria to produce new successful companies, the government’s preference for handouts as a way to end poverty, would need to be replaced with policies that allow the private sector drive growth in the economy. Instead of giving handouts, providing critical infrastructure and amenities will enable businesses thrive, create jobs for millions of unemployed and contribute to economic development.

Source: By Caleb Ojewale

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