An Open Letter to Ngozi Okonjo-Iweala and Olusegun Aganga

Honourable Ministers,

I write to you as someone with a lot of frustrations about the way Nigeria works (or doesnt) for the vast majority of its citizens. I tend to concern myself mostly with economic matters as I believe that economic freedom comes pre-loaded with many other benefits for a country and its people.

First the Facts

I have spent a lot of time lately looking at the model we have chosen for our industrial development using Dangote Cement as a lightning rod. The more one looks at the numbers and the reality of the situation, the more disturbing it is.

I have put together a comparison of Dangote Cement’s profits and the world’s largest cement manufacturers spanning Asia, Latin America, North America and Europe. You can find it here on iCloud or Google Docs. The numbers, without mincing words, are frightening. A Nigerian government policy is aggressively picking the pockets of its citizens by forcefully reducing choice in the market. This has inevitably led to us having the highest cement prices in the world.

Screen Shot 2014-04-15 at 10.55.13

The Chinese are the most efficient cement manufacturers in the world; their profits after tax as a percentage of their revenues comes to less than 18%. Globally the average profit ratio is around 6% (brought down by lower margins in Europe). Dangote Cement has a 52% profit ratio, 3 times the most efficient manufacturers in the world. If Dangote Cement were to sell the same amount of cement as the world’s biggest manufacturer, at the current rate, it would make more profits than the top 4 makers in the world, combined.

Whereas people in Vietnam can buy cement at $67/tonne, Nigerians are condemned to paying $263/tonne for the same product. The argument that the cost of doing business in Nigeria makes things more expensive does not square with the fantastic profits that Dangote Cement is making. Both – high profits and high business costs – cannot be true at the same time.

It feels as if Nigerians are being punished for a crime that remains unclear. It gets worse – only 5% of Dangote Cement is owned by Nigerians so the level of participation in these fantastic profits are extremely limited. If and when a further 20 – 25% of the company is floated on the London Stock Exchange, and this forceful extraction of profits from Nigerians continues, we may well end up with a perverse situation where poor Nigerians will be enriching pensioners in the rich world via their pension funds who will undoubtedly invest in the company.

In taking out $1.2bn in profits from the Nigerian economy in 2013, Dangote Cement put back $43m into the economy via wages and salaries to its employees. Most painful of all, it paid nothing in taxes in the last year (or the year before) due to the various government incentives it continues to benefit from as a ‘pioneer’ company. Without these incentives, it would have contributed somewhere in the region of N70bn to the Inland Revenue as taxes. My workings I linked to earlier show this starkly – the company which sells the least amount of cement, makes the most profits and pays no taxes. All of this sits beside your stated objective to boost tax revenues as a percentage of our newly rebased GDP. Will you go after ordinary Nigerians and small businesses while leaving these huge gaps in your fiscal policy?

It is one thing to allow a loss making company get a breather from the tax man while it finds its feet, it is quite another to waive taxes while a private company rakes in the profits.

How Did We Get Here?

Whatever it is this cement policy was designed to achieve, it is hard to believe it was designed to impoverish Nigerians in this way. The reality has so far deviated from the intention that it will be difficult for you to justify keeping the status quo.

How do we square having the highest cement prices in the world with having a housing deficit of 17 million homes? This cement policy will undermine whatever you do elsewhere, especially the recently launched NMRC. It goes without saying that cement is a vital input with its real benefits in what it is used to achieve. If Dangote Cement employs 20,000 workers, then we can be certain that cheaper cement will create this number of jobs in housebuilding alone in a matter of days. By making cement the beneficiary of such lavish treatment, you are essentially driving the economy with the handbrake on.

I know people who are building their own homes at the moment and it is a painful stop-start affair because of the sky-high costs involved. While cement is not the only obstacle to building your own home (land use laws also lie in wait), is there any reason why government should so blatantly be adding to the problems in this way?

Policy Change – Catherine The Great’s Example

Often times, policy makers openly commit themselves to a policy in a way that makes a u-turn politically expensive even when the results of that policy clearly show it to be counter productive. This is made worse when the policies are ‘popular’ when first proposed. Not many would have argued with a policy that encouraged local production of cement with all the benefits that come with it, at the time it was proposed.

But when we find ourselves in a situation where we are producing cement for cement’s sake, what to do?

I am reminded of a story about Catherine The Great when she ruled Russia in the 18th Century. Early in her reign, Catherine had strongly and publicly supported the banning of Jews from being allowed to immigrate into Russia and confining them to what was then known as the ‘Pale of Settlement‘. Given how Jews have always been discriminated against, this was undoubtedly a popular policy position at the time. Not only were they considered as weirdos (on account of their religion which non-Jews didn’t understand), they were also middlemen minorities with a habit of rising above any discrimination to gain a stronghold on the local economy.

Alas, as time went on, the cost of this policy became evident because Jews played an important commercial role in the places they had been banned from. Even people who hated them had been happy to do business with them. At a time when technology was not this available, people were the most important asset in an economy.

Catherine was then faced with the dilemma of having to reverse a counter productive policy while continuing to appear as a strong, decisive and popular leader. So she came up with a plan communicated in a famous letter she sent by courier to George Browne, the Governor General of the Province of Riga at the time:

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That was not all. Being bilingual, she added the following words, in German, at the end of her letter:

If you don’t understand me, it will not be my fault. The President of the Guardianship Chancellery wrote this letter himself, keep this all secret.

In summary – Catherine The Great banned Jews from Russia. Catherine The Great also created a loophole that allowed her to break the very law she had passed and continued to ‘support’ in public, going as far as writing in German just in case the letter somehow leaked to the public.

Just as she cleverly avoided mentioning the word ‘Jew’ in her letter (she used ‘some merchant people’ instead) so did her immigration officials ‘scrupulously avoid any reference to Jewishness or Judaism’ when handing out passports.

Long before Bill Clinton came up with Don’t Ask Don’t Tell (another policy workaround) as a way of allowing gays to serve in the American military, Catherine The Great had done it.

I share this story to illustrate a simple point – policy makers are never short of options no matter how difficult the situation is and no matter how ‘publicly’ committed they are to the status quo. Indeed Deng Xiaoping famously moved China away from Communism to a market economy by cleverly declaring that – “it doesnt matter whether a cat is black or white, as long as it catches mice“.

Whatever you do, this policy of restricting imports while handing Nigerians over to Dangote Cement (and Lafarge) to be stripped of their little wealth cannot be allowed to continue. Yes, it is a key part of our Industrial Revolution Plan and the government is clearly proud of what Dangote Cement has achieved. But enough is enough.

A Simple Recommendation

So how can the government eat this policy cake and continue to have it? You will undoubtedly have your own ideas if you wish to change course or ‘adjust’ the policy.

But my concern here is for the average Nigerian to ensure that our cement prices trend towards the global average. Even halving prices will do wonders for construction and create the jobs we desperately need. Here they are in a few simple steps:

1. Resist the temptation to award licences for anyone to import cement. This will merely transfer wealth from one set of people to another at the expense of Nigerians. Given that cement is an input, the goal is to get the commodity into the hands of Nigerians as directly as possible. Whatever is built with the cement will remain in Nigeria, it cannot be taken out of the country.

2. You set some rules or standards on the exact type of cement we want in the country to boost housebuilding. For example, we can say we want only 32.5 and 42.5 grade given that these are the ones used to build residential homes. Thus the policy change will allow Portland Type xxx Cement in Grades 32.5 and 42.5 into the country. You can also restrict the brands allowed to, say, the top 15 – 20 manufacturers in the world.

3. You do not have to set a volume of imports. Instead have a target price in mind. Given that prices are currently $640/tonne, we should realistically be aiming for at least $200/tonne (N640 per 50kg bag). This will still be very expensive compared to other parts of the world but it will be major boost to our economy in terms of jobs. The NBS has shown itself to be capable of price monitoring in the last few years. You can enlist them to do this job.

4. There are several ways to do this next step but here’s my idea. A shipping container carries roughly 3 tonnes of cargo. Set this as the minimum or ‘unit’. Now, anybody who wants to buy cement will simply go on a website (you will set this up pretty easily) and apply for a minimum of 1 unit and a maximum of 2 units i.e. 3 to 6 tonnes. The ‘anybody’ in this case is very important because you have to ensure the benefits, as much as possible, accrue to those who want to use the cement to build houses as opposed to middlemen. In fact, you can exclude extant manufacturers from this explicitly, with the threat of sanctions if they try to game the system.

5. You can either review each application individually or simply use a lottery system to determine who gets the ‘permit’ (I truly hate this word but I don’t have any other one to use). One application per person in a year, multiple applications not allowed etc. People can be encouraged to club their orders together to make up the minimum amount.

6.  Once an application has been approved, the person can then be issued a ‘permit’ allowing them to import their allocation within a 3 month time period after which it will lapse if not used. You can ask for information on what brand they are planning to import as well as what country they are importing from beforehand. When prices hit the level you desire, you simply stop handing out the ‘permits’. If they start to rise again, you hand out some more. Ultimately, you will have the whip hand in the market.


It isn’t more complicated than what I have written above, at least to my mind. The whole point is to force down prices so we can create jobs and disperse the benefits as widely as possible. I stress the point – forcing down prices in this manner does NOT mean that Dangote Cement will lose its investments in the Nigerian market. The huge profits it is currently making suggest there is plenty of room for price cutting. It will simply make fewer profits not none at all.

You say you want inclusive growth? You say you want to reduce poverty? You say you want to reduce the cost of building a 3 bed house in Nigeria from $50,000 to the $26,000 it costs in India?

Well, this cement policy is directly standing in the way of these things that you want to achieve. There are many other self-inflicted policy wounds throttling the economy. But beat this one – the Big Kahuna as the Americans say – and the rest looks easy.

Your move, Honourable Ministers.


48 thoughts on “An Open Letter to Ngozi Okonjo-Iweala and Olusegun Aganga

  1. I am sorry, we cannot do this to Dangote.
    Do you know the amount of money he used to put Jonathan in his pocket (via donation for GEJ’s Campaign) and how much he spent in the past to maintain status quo?
    Out of the 52% profit ratio, 24% goes back to government in various forms. The government benefits directly from the monopoly it created.
    I am sorry Feyi- you have stated the obvious but this govt is in a deeper mess than you can imagine. Madam NOI will put her hands behind her back and talk her way around the matter but not tackling it, it’s beyond her- she is a pencil in the hands of the CABAL.
    Another election round the corner…..go figure.

    1. Madam NOI is not a pencil in the hands of the cabal; rather she represents the voice of the everyday Nigerian. With her, we can rest assured of positive change.

      1. @Ayodeji, she is worst than pencil if we have any other material or tool to describe her. It is unfortunate fewer nigerians understand economy and good comparative market system. We have every right to demand and compare prices all over the world and within the region. Madam NOI looks too uneducated to understand Nigerian Economy better than most Nigerians. She does not fit in to our own system to understand that the Cabal are vested interested whose wings are easily clipped, creating a marketing mechanism to bring the prices of building material most especially cement. Dangote makes a lot of money at the expense of poor nigerians, history will never forgive him.

  2. I Googled NMRC to learn that it means Nigeria Mortgage Refinance Company and I belive tjhat NBS is the National Bureau of Statistics.

  3. Pingback: An Open Letter to Ngozi Okonjo-Iweala and Olusegun Aganga – Y! Opinion

  4. As opposed to your permit system I would propose a simple system to increase supply and thus reduce price:
    1. Remove all restrictions on cement import.
    2. Remove all duties on cement import.
    3. Mandate that the whole sale price of imported cement should not exceed the CIF price plus 15%. Any importer violating this gets hit with a punItive fine of 50% of the CIF price and is banned from future cement imports.

  5. You have all spoken very well but you see Nigeria is a very furtunate country in the hands of unfurtunate broad of Vipers in Human shadows. It is only when we stand up and fight back to resist this malfunctioning ruptured mad system parade ! Thank you but we must take it by force not only by pen or media network!!!

    1. LOL…as a free marketer this appeals to me. But I think, but I’m not totally sure, they Chinese producers get their energy or gas subsidised by the govt.

      But still, if someone can make cement in China, put it on a ship and send to Nigeria, then we probably need to fix up

  6. Have you considered the impact of your idea on the foreign exchange reserve and it effects on the value of the naira,(would your idea not eventually lead us to chasing shadows?) do you know how much effect the issue of fuel importation has on the reserve and of the Naira. I believe in free market and as it i have nothing but respect for Dangote and the likes of him who have taken the bold step to invest in Nigeria.We sure cannot have our cake and eat it. we want everything good yet not prepared to make the sacrifice to achieve that, I am strongly of the opinion investors are all over the world and this resource is available in Nigeria , Now imagine your solution is applied to sugar , indomie and all other stuff dangote produces I leave you to imagine that. Government has no business in interfering in Business , they owe a duty to make businesses thrive and as much business should be encourage just same way. if you remember well, when the Gsm companies started operation we were getting the lines at cut throat prices , right now we are getting it for almost free.I would rather subscribe to the idea of domesticating the competition to drop prices , rather than importing thru external competition ( that will amount to chasing shadows , its impact on our reserve and the overall economy will be painful and will certainly not have the desired effect especially with the kind of import dependent economy we have now,your idea may have worked if the reserve or the naira was not under any strainor limited strain. even as it is, a drop in price of oil to $75 per barrel may lead to Naira further strained to about 250 naira to a $1.I commend you for your effort for putting it to public notice the huge profit made by dangote, but i advise we be careful here as you and i know that dangote will certainly be contending with issues well beyond his capacity, i am certain he is a patriotic Nigerian and will certainly want the best possible for his country and at the same time want to be be in business for the prize of it

    1. The solution cannot be applied to sugar or indomie because those industries are contestable. If you import noodles into Nigeria today, you will almost certainly lose money because indomie is not priced so ridiculously to the point where there are arbitrage opportunities to bring it from another country, pay duties and still be able to sell it for a profit in the market.

      We have a cement problem, we dont have an indomie or sugar problem. And that cement problem is compounded by the government ban.

      Not being able to build the infrastructure we need has a cost too. No option is without costs. The question now is – which option costs the least? Or will yield the higher long run benefits

  7. My pple we hv all spoken well bt i thnk d suggestion of importing cement is jst for d price to b reduce bcos if there is competition definitely the price will be affected. At d same time if we dont want importartion apart frm our product then dangote shld reduce the price for real. Very simpe. we cant say dangote is sponsoring jonathan or any political stuff in the country then we shld all be surfering. Let anyone that cant sponsor him or herslf go back home until he is capable. Pls let wake up nd stop using money to kill people destiny. Hw can an ordinary nigerian avoid 2000 for a bag of cement nd we expect poverty to be eradicated. We shld think well. Tx

    1. You’ve pretty much explained my point. If we don’t want importation, fine.

      But let Dangote Cement return some of those profits to Nigerians in the form of lower prices

  8. I’m fully aligned with what you outlined here Feyi. I also think the honourable ministers need to go learn how South Korea became so prosperous (with little natural resources and overpopulation) from the 1960s after their ‘liberation’ (same period we became ‘liberated’)…

    PS: Great piece Feyi. But Dangote is coming for you….LOL.

  9. Reblogged this on FAA's Prophetic & Patriotic Musings's Blog and commented:



  10. very great eye-opening write up Feyi…i’d like to ask…is there any where in the policy for local cement production that stops new players from joining and also enjoying this same tax breaks? if there’s none…i think i have an idea that can make us turn the tables against them using the same policies they have created…

  11. How about simply enable local production, gradually stifle importation and stimulate growth of local production by forcing them to export – a la Park Chung-hee’s automotive policy in South Korea?

  12. I am thrilled at this piece, Feyi. Good work. There is no doubt that God blessed this country with great HR that can make this country one of the greatest in the world. Sadly, such people turn a new leaf when opportunities to implement these lofty ideas come their way to move this country forward. I won’t bother mentioning names, because we all know so many of them who were at the forefront of the fight for the survival of the common man, but put on a different cloth when given appointment by Government. That notwitstanding, I am praying and hoping that such people as Feyi would have the opportunity to work for the majority of Nigerians, not for themselves and a few. Cheers

  13. My worry is that if Dangote makes as much profit as imagined, what exactly has stopped the ‘pure water company’ proliferation model to be replicated in the cement industry, are newcomers being restricted from siting cement manufacturing companies in Nigeria ?

  14. All makes sense, but all based on the premise that Nigerian leaders actually care for the Nigerian people. I beg to ask if Nigerians even care for themselves. Nigerians fail to see the bigger picture which is in line with that which you have painted in the cement industry, largely because Nigerians only think of self and lack a sense of collective good – myself, my own and my pocket. I put forward a wager, come April 16, 2015, the Nigerian cement will at least remain in its current state or be worse. Why am I so sure? Election year!

  15. Interesting perspective. Just few days ago, I was telling a friend about Dangote Cement has been making N53 as profit out of every N100 of revenue generated in the past 5 years. That’s just suspiciously unreasonable when you consider costs of raw materials, energy, labour, finance(yea the banks are literally throwing money at his feet) etc.

    By the way, Dangote also makes indomie (Dangote Noodles) and they are quite delicious :).

    Back to the issue at hand – Feyi, cement manufacturers perhaps in their bid to forestall future granting of import licence in the country has been making the argument that Nigeria has reached and even surpassed her cement production needs. In other words, we have cement glut in the market. So if there is any iota if truth in those statistics (you will find them in Dangote Cement 2012 annual report) then importation may not be the solution to be pursued friend. I believe in free markets in principle but unfortunately I think government needs to come in to regulate cement prices in Nigeria. This nonsense has gone on for far too long.

  16. Pingback: Response to My Open Letter: An Insight Into Nigeria’s Cement ‘Market’ | Agùntáṣǫólò

  17. Great piece. I believe in free markets but I also believe in intelligent government intervention where necessary. Some of the anti- Dangote sentiments in the comments are unnecessarily personal. Dangote is an entrepreneur and his job is to make maximum profits he has done no wrong by making maximum profits. We must resist the culture of crucifying entrepreneurs because they are the ones that will build your economy and create jobs. We need to focus our attention on government. They are the ones who have a responsibility to ensure that cement prices are at a minimum. My first reaction is not to encourage imports in order to drive down prices. What you gain with one hand you will lose with the other to factors like balance of trade and pressure on your naira and foreign reserve. I would prefer we focus our attention on local competition. What are the constraints preventing local producers from competing with Dangote. If there is a way some incentives, advantages or assistance to other local manufacturers can exist to help them increase their output I’m more favourable to that because it also creates more jobs. Imports should be the option of last resort because it comes along with its own baggage.

  18. Lola Shoneyin get real!!

    Nigerians don’t count.

    What DANGOTE Provides:

    1. Major funding for the (s)elections of all our presidents since the return to “democracy”.
    2. Cement at between N1400 to N2000 ($7-$12) a 50kg bag. I hear you counter that a 2009 Vetiva Report on the Nigerian Cement Industry stated a fully operational Obajana (gas powered) would be able to produce a 50 kg bag for N93.00 (LPFO in Kogi & Ogun State is the world’s most expensive fuel); you DO NOT COUNT.
    3. Nigerian produced Cement, though it costs more than it does to import it from China, etc. Counter argument transportation adds 40% to the cost, while LPFO adds a huge amount. The figures still do not add up; you DO NOT COUNT.
    4. He is in a competitive industry. This is the reason why some of his competitors have been shut down and newbies strangled in infancy. Why the CMAN cartel has a one price fits all approach; you DO NOT COUNT.

    In some cases up to 60% of the “developed” countries (top 20) economies are driven by the mortgage market in Nigeria our mortgage market makes up 0.2% of our economy, how is a bank employee with a husband and 3 kids on a $10,000 per annum salary going to be able to afford a $50,000 mortgage at 8% interest; let alone the other 95% of the population who do not earn what she earns.

    Answer: Cheap cement would go a long way to rejuvenating an economy that officially requires 17 million homes and unofficially closer to 30 million homes.

    Open the markets let everyone import cement for the next two years, miraculously CMAN will collectively drop their prices. You are putting 20-30,000 jobs at risk, well the return is that hundreds of thousands of cheap homes, schools, hospitals, etc would be built. Resulting in millions of jobs for those directly employed and supporting industries from building materials to banks, insurance and food producers; an all round win-win for those that DON’T COUNT.

    Truth be told that just like Oil where a cartel have ensured that you DO NOT COUNT; cement has also been gobbled up by those who think they count. Sadly due to their limited “street trader”, “make cash now, instead of making more in the future” we will have to suffer for now……. Help is on its way.

    I hear that Aliko wants to list on the world’s biggest bourses, well eventually compliance is going to hit hard and if he becomes global big whilst using the same model; international vested interests will explain to him how the world runs the way it does.

  19. Pingback: Response to My Open Letter: An Insight Into Nigeria’s Cement ‘Market’ – Y! Opinion

  20. Fighting monopolies are ridiculously difficult. If after all this dense has putting the country through, there is still belief that he can ‘do’ something then, you Nigerians are funny. The statistics are VERY true.

  21. Pingback: An Open Letter to Ngozi Okonjo-Iweala and Olusegun Aganga – |

  22. Cement is not the only cost in house construction. Other costs include labour which is substantial,land, roofing, Iron rods etc. For the cheapest house cements accounts for 30% or less of the total cost of construction. As the cost of the house goes up due to size or sophistication cements starts to account for less by percentage of cost. If a house costs N1M to build then at 30% cement will cost N300k.Even If the price of cement drops by 50% to N1,000.00 due to imports which is an unrealistic expectation you save 150k. It will now cost 850k to build the house The difference of 150k is not why we do not have housing estates sprawling nationwide. Solving the housing problem will require a more holistic approach than just cement price targeting. The jobs currently created by the local cement industry is a worthier benefit than the not too significant impact of enabling large scale importation of cement that will have only a slight dent on the cost of house construction. there are other ways of dealing with Dangote’s excesses without using jobs as collateral damage.let’s not cut the nose to spite the face.

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  24. Good read. Not a Dangote apologist, but the narrative that he pays no taxes is incorrect. Yes, his companies are exempt from paying company income tax if they have pioneer status (3-5 years). That only applies to CIT, the companies still have to pay vat, education tax, and WHT. Having said that, it makes no sense that a company makes profits in the billions and still enjoy a tax holiday.

  25. Pingback: Nigeria’s Rice Policy: That Glorious Piece of Paper – Feyi Fawehinmi | NigeriansTalk

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