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Business war: Kano elders reconcile Dangote and Rabiu of BUA cement (photos)

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Northern elders in Kano state have reconciled ALHAJI ALIKO DANGOTE and ALHAJI ABDUL-SAMAD RABIU of BUA cement.

The Fight: On 1 September, Abdulsamad Rabiu, chairman of one of Nigeria’s (and Africa’s) biggest conglomerates, BUA was all smiles in Paris as he signed a technology licensing deal with Jean Sentenac, CEO of Axens, France’s largest hydrocarbons group.

The agreement is that Axens will supply process technologies for BUA’s upcoming integrated refinery and petrochemical facility in Akwa Ibom. The greenfield project, which is expected to be operational by 2024, is the latest in the Nigerian billionaire’s audacious moves to stamp the BUA brand as an exceptional regional force.

When completed, the facility will refine 200,000 barrels per day (bpd) of hydrocarbons – a ninth of Nigeria’s 1.

8m bpd oil production– and help reduce the country’s unacceptable dependence on imported fuels. It will also export high-quality gasoline, diesel, kerosene, jet fuel and propylene to neighbouring markets.

To succeed, Rabiu will have to source and develop technical expertise, build at least a 100MW generating plant to power the facility, and construct roads wide and strong enough to carry imported refinery structures and parts.

BUA secured a large and strategic port on the Atlantic Ocean coast from the Akwa Ibom government, thereby easing its logistics. The epoch-making project will swallow billions of dollars and a number of development and commercial banks have stood in line offering to finance the operation via debt and equity.

If this sounds like deja vu, it is because this bold move mirrors a move by another Nigerian tycoon, Aliko Dangote, who himself decided to diversify into petrochemicals.

Rabiu’s bold entry into the refinery business expands the decades-long competition for market dominance between his conglomerate and the Dangote Group, into new territory.

His predecessor in the venture, Aliko Dangote’s highly anticipated $12bn refinery, will produce 650,000 bpd and is expected to begin operations in 2021. Business pundits have long pontificated that there seems to be bad blood between the two men.

If anything, this battle or clash of the titans can only be a good thing for the country, and indeed the continent. America was built by bold industrialists, each vying for dominance. The Korean chaebols (large, conglomerate family-controlled firms) which are now global giants, grew huge thanks to fierce competition amongst themselves that pushed them to innovate, be lean and become globally competitive.

The cynics might ask, why is Rabiu trying to get a finger into yet another Dangote pie? Rabiu explains that the move represents diversification, especially given the pressure on commodities related to FX and the dollar crunch. But it’s fascinating to understand the two men and their businesses.

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In the beginning, The clash in business interests between Dangote and Rabiu has its roots in traditions pre-dating both men’s business careers. Alhaji Aliko Dangote comes from a celebrated lineage of wealthy merchants from the northern commercial capital of Kano.

His famed maternal great and grand relatives made fortunes importing and exporting edible commodities. Upon completing his studies at Egypt’s Al-Azhar University, the young Dangote in 1977 naturally picked up trading commodities in which he had amassed generational knowledge and a network by proxy.

Abdulsamad Rabiu also has a heritage in commodities trading. His late father, Isyaku Rabiu, was a renowned merchant and industrialist in Kano State in the 1970s and 80s.

But a 1983 military coup under Major-General Muhammadu Buhari overturned the fortunes of the senior Rabiu for his failure to pay for rice imports. In 1988, eleven years after Dangote struck out in business, the young Rabiu made up his mind to change his family fortunes and founded BUA International.

Over 30 years later, the Dangote Group stands out as a leading pan-African brand with interests in commodities, energy and logistics. Its companies have over 30,000 employees and his group represents nearly a quarter of the Nigerian Stock Exchange’s N28 trillion ($75bn) value. Its crown jewel, Dangote Cement, single-handedly boasts a market cap of $14bn and controls 60% of the market.

The ‘challenger’, BUA Group, has interests in cement production, sugar refining, real estate, logistics and port operation. Its largest operation and only publicly listed company, BUA Cement, which came to market earlier this year, has a $3bn market capitalisation and 17.6% market share.

Though BUA subsidiaries have often trailed Dangote’s, the Rabiu-led group’s market recognition has come by deploying strategy and doggedness to break through tough market entry barriers and assume leadership positions.

Price wars, legal battles and criticisms
Leveraging its dominance in the market, the Dangote Group has always responded by weaponising pricing to put its competitors out of business.

For example, when BUA Cement started production and reduced prices by about $20/tonne to attract customers, one of the Dangote strategies was to temporarily beat down their prices. Rabiu was unperturbed and instead, focused on meeting the demands of underserved markets in the Northern region, which eventually earned BUA the title ‘King of the North’.

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Their rivalry really intensified under the administration of ex-president Olusegun Obasanjo. Many (falsely) attribute Dangote’s success to favouritism by Obasanjo. It’s true that Dangote benefited from favourable government policy towards certain goods to encourage import substitution, but he was already powerful and his success can be attributed to excellent execution.

Still, accusations are directed towards what is claimed as favouritism towards him – to the detriment of his major rivals – regarding preferential access to foreign exchange and preferential tax arrangements. Between 2010 and 2015, Dangote Cement paid N12bn in taxes, an effective tax rate of just 1%, it is alleged by some.

The BUA chief allegedly wrote a petition to the current President Muhammadu Buhari, detailing how policies of successive governments over the last two decades have “unduly” favoured his kinsman.

But it now seems the gloves are off as the rivalry heats up and the battle for cement supremacy intensifies.

Both companies are currently locked in a bitter dispute over mining rights in Obu-Okpella in Edo State. BUA has its highest-producing cement plant in the area and has accused Dangote of blocking access to the mines – which are a rich source of essential material in the manufacture of cement.

Dangote, on the other hand, claims ownership of the mines. The complicated case was still before the courts at the time of going to press.

Good vibes despite rivalry
Apart from the generational business interests of both men, favourable government policies have often determined the direction and expansion of their businesses. A backward integration policy introduced under the Obasanjo Administration to reduce over dependence on imports created opportunities for each of them to establish operations in key industries – cement, sugar and flour.

Dangote Sugar has a 70% market share. The subsidiary possesses an 800,000 tonnes annual production capacity plant which is the largest sugar refinery in Africa and the third-largest in the world. It is the main supplier to the country’s soft drinks companies, breweries, and confectioners.

But BUA puts up an impressive fight. It broke Dangote’s total grip on the market in 2008 by establishing a plant with an annual capacity of 720,000 tonnes. The facility remains the second-largest in West Africa after the Dangote Sugar Refinery.

Cement has helped place the two northern business moguls among Africa’s wealthiest. Forbes estimates the net worth of Rabiu and Dangote at $3.2bn and $8.3bn respectively as of July 2020. Despite Nigeria being the continent’s largest cement exporter, Rabiu says output is still not enough to satisfy local demand given its huge population.

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As at 2018, the country had an annual production of 35m MT but needs to produce up to 50m MT of cement for its 200m population.

Both BUA and Dangote have exited the flour market, where Flour Mills of Nigeria wields a 55% market share, to concentrate on cement, which delivers higher returns.

In 2016, BUA Flour was bought by Olam for $275m. Three years later, Dangote sold its loss-making mill to Olam for $361m. Now they have their eyes on much higher returns in the costly game of petroleum refining.

Interestingly, outside of business, the two men appear to be friends. Rabiu was invited to Dangote’s daughter’s wedding in 2018. “I don’t think there’s any animosity between the two industrialists though,” says Feyi Fawehinmi, a UK-based economic commentator.

Both men are in their sixties and have hinted that their supposed rivalry is nothing personal. Earlier in the year, Aliko Dangote visited Abdulsamad Rabiu at his BUA headquarters, on Victoria Island, Lagos.

Wearing a light grey indigenous babariga outfit, instead of his signature two-piece suit, he looked in the mood for casual chat. Both men laughed and smiled for the camera in what was their longest public appearance since Dangote’s birthday, three years earlier.

“It was an honour for me to receive my friend and brother, Alhaji, in my office today. I share his vision and aspirations in transforming and industrialisng our beloved country, Nigeria,” Rabiu shared on social media.

For any outsider, greater competition can only be beneficial. Dangote and Rabiu’s combined 850,000 bpd oil refinery ambitions offer Nigeria’s economy much to hope for. The Department of Petroleum Resources has said that the country expects to become a net exporter of fuel and other petroleum products within the next two years. Consequently, this would increase foreign reserves and help strengthen the frequently weakened naira.

As Nigeria marks its 60th independence and its 20m citizens reflect on the gains of democracy, Aliko Dangote and Abdulsamad Rabiu’s rise is evidence that national champions are critical to truly transforming economies…even if that means creating an enabling environment for such groups to grow properly.

African Magazine).

 

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Meet Mr. Anthony Adejoh Okpanachi

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Mr. Anthony Adejoh Okpanachi

FIRST IGALA DEPUTY MANAGING DIRECTOR, ECOBANK PLC

FIRST IGALA MANAGING DIRECTOR, DEVELOPMENT BANK OF NIGERIA (DBN)

Mr.

Tony Okpanachi was appointed Managing Director/CEO of Development Bank of Nigeria Plc (DBN) in January 2017.

He is a seasoned banker with over 30 years’ experience. Before his appointment as Managing Director/CEO of DBN, he was the Deputy Managing Director of Ecobank Nigeria Limited since April 2013. Prior to that, he was the Managing Director, Ecobank Kenya and Cluster Managing Director for East Africa (comprising Kenya, Uganda, Tanzania, Burundi, Rwanda, South Sudan and Ethiopia). He was also at various times Managing Director of Ecobank Malawi and Regional Coordinator for Lagos and South West of Ecobank Nigeria.

Earlier in his professional career, he managed various portfolios including Treasury Management, Retail Business Development, Corporate Finance, Corporate Services, Branch Management and Relationship Management.

He holds a Master degree in Business Administration (MBA) from Manchester Business School UK, a Master of Science degree in Economics from University of Lagos and a Bachelor of Science degree in Economics from Ahmadu Bello University, Zaria, Nigeria. He has attended several Executive Management Development Programmes on Leadership, Corporate Governance, Credit and Risk-Management in leading institutions.

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Ibukun Awosika Opens Up On Her Sack As First Bank Chairman

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Ibukun Awosika, who became the first female chairman of First Bank of Nigeria in 2016, has spoken on the sack of the board by the Central Bank of Nigeria and her tenure.

In an Instagram post titled: My FBN Group Journey, Ibukun said she always “acted in honour and integrity with the utmost interest of the institution.

She also said she and the sacked board had brought “First Bank of Nigeria to a place where it is more than able to deliver utmost value to its stakeholders and the nation at large.

Awosika’s board and the board of the bank’s holding company were all peremptorily sacked by the CBN on Thursday, to preserve the “the stability of the bank, so as to protect minority shareholders and depositors.”

The decisive action followed the announcement, on Wednesday, of the appointment of Gbenga Shobo as the bank’s CEO by Awosika, when Adeduntan still has eight months to the end of his tenure.

Godwin Emefiele, the CBN Governor, queried the boards for the appointment, without its regulatory approval.

The CBN also opened a can of worms about the bank, about insider loans, by board members that are not compliant with lending rules.

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Emefiele said:

The CBN’s recent target examination as at December 31, 2020 revealed that insider loans were materially non-compliant with restructuring terms (e.g. non-perfection of lien on shares/collateral arrangements) for over 3 years despite several regulatory reminders.

The bank has not also divested its non-permissible holdings in non-financial entities in line with regulatory directives.

Awosika did not pointedly address the issues raised by the CBN for ousting her board, but fed her over 200,000 fans on Instagram, with positives on her 11-year journey with First Bank and its affiliates.

Read her statement:

In October 2010, I was appointed to join the board of First bank of Nigeria.

A few months later, I was appointed to chair the board of its start up FBN Life Insurance Limited (a joint venture with Sanlam of South Africa). As its pioneer chairman, I had the privilege of working with a strong management team led by Val Ojumah.

Together with the rest of our team we built a company that became profitable in twenty four months and continues to be so.

In early 2013, I was moved from FBN Life Insurance Ltd, to assume the chairmanship of FBN Capital working with a brilliant team led by Kayode Akinkugbe as the Managing Director.

We worked hard to build the institution, bought Kakawa Discount House which I was again asked by the Group to Chair. We eventually merged the companies to create the FBN quest Merchant Bank Group, which I chaired until my appointment as Chairman of First Bank of Nigeria on January 1st 2016.

For over five years , I have worked with a dedicated team of board and management , with the support of Central Bank of Nigeria to rebuild and restructure the institution for its future. This included cleaning up non performing loans, establishing good operational governance systems and processes, building controls and an effective and robust risk management system.

I am confident we have brought First Bank of Nigeria to a place where it is more than able to deliver utmost value to its stakeholders and the nation at large.

As a board, we acted in what we clearly believed to be in the best interest of the bank and we had great plans and aspirations for where the bank could go to in its future, building on all the work that has already been done in the last five plus years.

Without a shadow of doubt, I will unequivocally state that I have always acted in honor and integrity with the utmost interest of the institution, all our stakeholders and the Nation.

Thank you.

Ibukun Awosika

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First Bank shares fell by 6% as fear of AMCON takeover hovers over Honeywell

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First Bank Nigeria Holdings (FBNH) closed with a loss of -6.6%, placing it at the third position in the NSE ASI for Thursday.

After the appointment of the new Managing Director/Chief Executive Officer (MD/CEO) for First bank Nigeria, Mr Gbenga Shobo, the CBN responded by re-instating Dr. Adesola Adeduntan as the MD and sacking all directors of the bank, as well as the parent company, FBN Holdings.

CBN stated that First bank Nigeria was of essential importance to the Nigerian banking sector given its historical significance, size of balance sheet, large customer base and high level of interconnectivity with other financial service providers, among others.

With First Bank Nigeria holding over 31 million customers, and a deposit base of N42 trillion, the CBN took a decisive step to mitigate the damages of corporate misgovernance.

Despite the healthy balance sheet maintained by First Bank up until 2016, FBN was unable to successfully scale CBN’s target examination as it revealed grave financial condition with alarming capital adequacy ratio (CAR) and non-performing loan ratio (NPL) scoring below the acceptable parameters. Hence, the CBN justified its interference as a quest to stabilize the bank and maintain financial stability in the banking sector.

However, this intervention may have a substantial impact on the share price of FBNH as stock market traders expect a double-digit dip as the opening bell commences. Part of the concerns raised by the CBN was the issue of loans procured by favouritism, which failed to adhere to the terms for the restructuring of their credit facilities.

However, alternative views suggest that the removal of Oba Otudeko is welcomed by the investing community who view the former Chairman of the bank as a major reason why it has failed to deliver impressive shareholder value.

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Shares of Honeywell Flour Mills, a consumer goods company owned by Oba Otudeko fell 3.76% on Thursday and could fall further by Friday when the market reopens as investors digest the impact of the CBN’s announcement and what this could mean for the survival of Honeywell.
Some analysts have opined that the CBN announcement may trigger an AMCON takeover of Honeywell Nigeria Plc if Oba Otudeko fails to repay his loans.

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