It’s not an ‘Alhaji Problem’, it's the State!

As part of my daily routine in recent weeks, I try to read up on a variety of subjects through online platforms like Onion, Project-Syndicate, NY Times, Huffington Post and Medium — all good places to read op-eds, and analysis rather than news reports. Before I left office on Tuesday, I saw that Feyi Fawehinmi had published ‘Alhaji Putin’s Republic’ on Medium; but I couldn’t read it because I had to get out of the office fast. Coming from Feyi, I knew it was going to be a good article, like most of his articles are. He writes in very simple terms, such that a person who has no idea of the topic he’s writing about would to a large extent, grasp the contents of his write-ups. And what’s more, he leans on data to drive home his points. Y’all should give him a follow.

On Wednesday, one of my ‘ogas’ in the office who read that same article was quick to come to the Research Division to tell us about his discoveries. “Someone said Dangote Cement is the most profitable company in the world”, he quipped. “It’s not impossible” we replied, knowing fully well that Dangote released its full year earnings for 2015 the previous day. Indeed, the numbers were impressive. Revenue was up, net income was up, dividend was up; in fact, virtually everything was up. To cut to the chase, as the explanations and arguments drew to a close between my lawyer oga and analysts in my division, the former closed with “he said we might as well be paying him taxes”, referring to Feyi’s last words. Right then, I suspended what I was doing and rushed to read the article.

It’s a good article; I enjoyed reading it even though I disagreed with the intent of the article. Not the content. The argument was rock solid, more so the data. And as they say, numbers (when used properly though) don’t lie! The article was backed up with sufficient data to prove the point.

The fact is Dangote Cement has generated N1.86trn in revenue over the past six years, of which N1trn was profits. In essence, that’s a profit margin of 53.8%. You are probably wondering who makes that kind of money right? Process it. Let it sink in. But before then, here’s another startling revelation: Dangote Cement has only paid N12bn in taxes!

By now you should be asking why he pays just 1% of his profits as taxes. It’s not farfetched, Dangote Cement has Pioneer Status. According to the NIPC, “Pioneer Status is aimed at enabling the industry concerned to make a reasonable level of profit within its formative years. The profit so made is expected to be ploughed back into the business”. In addition, “Pioneer status is a tax holiday granted to qualified or (eligible) industries anywhere in the Federation and five-year tax holiday in respect of industries located in economically disadvantaged local government area of the Federation. At the moment, there is a list of 71 approved industries declared pioneer industries, which can benefit from tax holiday”.

Well, not just one industry, it’s eligible in seventy-one others. Clearly, it’s within the rules. It’s a practical example of tax avoidance. Though many other companies enjoy this, the grouse is that Dangote cement continues to enjoy this each time it creates a new line, even in an existing plant. The Obajana Cement Plant and Ibese Cement plants are classic examples of this. Whenever there is a new line in these plants, he gets a pioneer status for them. But as ridiculous as this is, it’s not an offence neither is it a crime. It’s simply a loophole that Dangote Cement has effectively capitalized, over and over again. But that’s what smart businessmen do. That’s what I’ll hire tax experts to help me do as long as it doesn’t contravene the laws of the land.

As mentioned before, the content is good, but the intent? I don’t agree.

The intent of the article can be first seen in the topic ‘Alhaji Putin’s Republic’ and the constant usage of ‘he’ or ‘Alhaji’ instead of Dangote Cement. As far as I know, Dangote Cement as an entity is different from Alhaji Aliko Dangote, so I wonder why the article is made to be about the largest shareholder of the firm. I bet many companies have enjoyed the same reliefs under the ‘Pioneer Status’ incentive, making them no different from Dangote Cement. I would like to think that an appropriate intent should be towards critiquing the policy and not the man, since it’s not exclusive to Dangote Cement in this case. Oil companies enjoy it, consumer goods companies enjoy this, and heck everyone enjoys this. So I repeat, it’s not an Alhaji problem.

Clearly, it’s a Nigerian problem that has to be solved. A policy that has, in retrospect, allowed companies to make exorbitant profits at public expense should be tackled in a manner that would bring its end. Perhaps, the incentive has yielded unintended outcomes, but who is to blame? Do you blame businessmen or the policy makers? Apparently, Feyi sees it as Alhaji’s problem in a rejoinder titled ‘How to Solve the Alhaji Problem’. At this point, I felt irrespective of the data the argument had turned to be an emotive one. I certainly believe that a citizen is entitled to be enraged (should be sef) by a policy that continues to shortchange the country. But lately, I’m all for solutions and not the persistent whining that seem to now dominate public debates. And when we talk solutions, we have to take the right approach. The approach I recommend is to tackle the root cause of the policy failure, not the symptoms. The latter can only get you so far!

Truth be told, Feyi did justice to this in his rejoinder, offering possible solutions. However, the deed had been done. Many people who read the first article see Dangote as the enemy, a devil incarnate, and a vampire determined to milk the nation dry. Someone even said he’s a smart criminal. But really, that’s what an article like that will incite people to think, more so people who have no idea that the ‘Pioneer Status’ is legal. And it’s what too much sensationalism does.

It’s a free world. You are allowed to hate anybody; you are allowed to hate their business methods. In doing that, I believe we should leave room for objectivity. There are business practices common worldwide. Lobbying is common. Rent seeking is common. Political connections are important. In fact, we’ve heard tales of how great businessmen sponsor politicians to various offices so as to sway government policies in their favour. But then it’s allowed. It’s the duty of the state to prevent all this from happening through not only efficient but also effective systems and institutions. It’s the duty of the state to ensure that the police chief can take decisions without an Emir’s approval. It’s not the emir’s fault; it’s the systems and institutions that allow that to happen.

We can only go so far in the anti-corruption battle without putting sustainable structures in place. Punitive measures should be the last straw to tackling corruption and other related offences; it shouldn’t be the only measure. To borrow elements from President Jonathan’s infamous goat and yam analogy, I believe you can’t perpetually keep a goat in the same hut where yams are kept and not expect corruption to happen. It’s impossible! There are no saints. ‘Dasuki’ will kick in. There is a ‘Dasuki’ waiting to be brought to life in everyone. While many people have been able to quell this due to a host of reasons, many others can’t. They need to be saved from themselves. It’s the duty of the state to have measures that will suppress this. It’s also the duty of the state to have punitive measures when the ‘Dasuki’ in people rears its head and circumvent measures put in place.

I’m all in for advocacy that will prevent market failures through government intervention. I believe public interest should come first in all policy considerations. But then it’s not the market or the players, it’s the state.