BY Hannatu Musawa
The 1981 Hollywood Blockbuster movie, Clash Of The Titans starring actor Harry Hamlin chronicles the adventures of one of the greatest Greek heroes and slayer of monsters, Perseus. This hero from Greek mythology was best known for rescuing people from beasts and his clever decapitation of Medusa, the hydra headed monster.
Medusa, was a monstrous flesh eating Gorgon with living venomous snakes in place of hair and she turns everything that gazes upon her face into stone. While it was a real battle, Perseus pulled his resources together and eventually defeated Medusa.
In our world, the recent “sugar” dispute between Dangote Industries Limited and The BUA Group is a currant example of how the hydra headed monster of monopoly was confronted and defeated.
A monopoly in any form is truly a hydra headed monster, which is destroying the Nigerian dream and does not augur well for the economy primarily because it creates a market concentration that likely results in higher commodity prices than in a more competitive market. It is also fraught with restricting output, reducing consumer surplus and economic welfare, restricting choice for consumers, reducing consumer sovereignty, lowering wages and the squeezing of suppliers amounts to billions of Naira in wealth transfer to the company with the market power.
With no competition for labor, wages stagnate because Companies can pay their employees less without having to worry about losing them to competitors. Monopolies are harmful to the society because a monopoly’s potential to raise prices indefinitely is its most critical detriment to consumers. For want of industry competition, a monopoly’s price is the market price and demand is market demand. As the sole supplier, a monopoly can also ‘refuse to serve customers. With all these manifestations, a monopoly can truly be described as a hydra headed monster.
Elementary economics views monopoly as a single seller, selling a unique product in the market and in a monopoly market, the seller faces no competition. The seller in a monopoly market is the sole seller of goods with no close substitute and they enjoy power of setting the price for their goods.
In a monopoly market, factors like government license, ownership of resources, copyright and patent and high starting cost make an entity a single seller of goods. The stated factors restrict the entry of other sellers in the market. Monopolies also possess some information that is not known to other sellers.
It is common knowledge that a highly profitable monopoly also has little incentive for improvement as long as consumers still demonstrate a need for the monopoly’s product and service. It is also beyond argument that businesses in a competitive market can compete by making changes to existing products and services and force down prices.
Nigeria, as a country, has been struggling to find its feet economically but so many factors have consistently militated against her economic fortune and held her down. The masses are gasping for breath under the crushing weight of high costs of goods and services. The country cannot afford to encourage tendencies aimed at creating a hydra headed monster or continue to sustain monopolies already created if the citizens must be liberated from their current economic woes.
There should be wide participation in the economy to engender massive production of goods and promote speedy jobs creation.
The BUA Group has launched deeply into revamping the Nigerian economy in answer to the call by the Federal Government of Nigeria to local investors to put its funds to developing the economy. The BUA Group’s entry into many areas of the Nigerian economy is saving the market from indices that were stifling growth in the nation’s economy and is already, significantly, impacting the employment rate in the country.
Nigeria is undergoing an era when diverse security crises and the apparent failure in the energy sector have destroyed foreign investors’ confidence in the country.
The nation’s residual focus to grow the economy should be on local investors who live in Nigeria, do businesses in Nigeria and have the genuine intention to make the nation great. On the part of the government there should be investment friendly legislation that will regulate economic activities thereby expounding the much sung “ease of doing business” by the government.
The government has put in place a Backward Integration Policy (BIP), which emphasizes the importance of developing value chain linkages with various sectors of the economy. The production of cement is one area where Nigeria has already achieved a significant success of backward integration owing to the implementation of the industry’s Backward Integration Program.
It is an admitted fact that The BUA Group is a foremost major player in the cement industry. It should be clear that The BUA Group has always paid the price as a monopoly breaker and a challenger of the monster’s hydra head and it has continued in that light.
Recently, The BUA Group’s huge investment in sugar production faced a real threat from competitors. The BUA Group is reported to have spent over $250 million on the Port Harcourt sugar project alone, which presently has in its employment over one thousand Nigerians.
The BUA Group’s sugar project in Lafiagi, Kwara State is solidly on track and likely to be completed this year as production is billed to commence by the end of the year 2022. Ordinarily, the government and masses of Nigeria should be basking in the euphoria of high hope of economic recovery in no distant time but there appeared to be a concerted and calculated effort by industry competitors to muscle The BUA Group out of the sugar production corridor presumably, in order to maintain the monopoly already in place.
A short time ago, Dangote Industries Limited and Flour Mills of Nigeria Plc petitioned the Federal government of Nigeria requesting the government to shut down The BUA Group’s sugar refinery located in Port Harcourt. Bordering on the acutely defamatory, the petition seemed to indict The BUA Group for deceitfulness and breach of law. In a letter jointly authored by the Chairmen of Dangote Industries Limited and Flour Mills of Nigeria Plc, it said that the establishment of the Port Harcourt Sugar Refinery by The BUA Group threatened the attainment of the National Sugar Master Plan (NSMP), including the sustainability of Nigeria’s local sugar industry.
What had gotten the petitioners goat appeared to be the establishment of the Port Harcourt Refinery by The BUA Group. According to the petition, the duo competitors said that, “in line with the Federal government’s policy on Backward Integration Program no new refinery will be allowed to operate.”
The complainants also accused The BUA Group of failing to invest substantially in local production or comply with its undertakings under its BIP. The petition further alleged that The BUA Group intends only on importing and refining raw sugar while claiming to be investing in developing sugar plantations in order to qualify for quotas to import raw sugar.
To a discerning mind, the petition came across rather more of a selfish attempt by the two industry players to ‘tattle-tale’ and incite the federal authority against another industry player that desires to expand the production capacity of sugar locally to attain self-sufficiency and provide the product for export. In the petition it expressed outrage by saying that; “we are particularly surprised by the brazenness as we believe that the choice of location and the publicity campaign behind the investment has been deliberately engineered to provoke public sentiment and pitch the federal government against its people.”
From the tone of the petition the concern expressed by the writers resonated like a particular dig against The BUA Group expanding its sugar production business rather than the Conglomerate violating any law, regulation or policy on National Sugar Master Plan (NSMP). One would have thought that the National Sugar Development Council is alive to its responsibility and does not need a petition from Dangote Industries Limited and Flour Mills of Nigeria Plc to intervene when necessary.
The accusations that came from Dangote Industries Limited towards The BUA Group really was quite rich considering that the majority of the Nigerian public perceived the fracas as a tactic that Dangote Industries Limited adopted in a bid to get rid of competitors by authoring frivolous claims against The BUA Group in order to maintain the hydra headed monster of monopoly.
Pursuant to the said petition, the Hon. Minister of Industry, Trade and Investment, Niyi Adebayo, wrote a letter dated January 10, 2021, to The BUA Group requesting detailed information on its Sugar Refinery in Port Harcourt, particularly the company’s plan to service the Nigerian and export markets from its refineries.
In its prompt reply dated February 11, 2021, The BUA Group took serious exception to the various claims by its two major competitors that it aims to circumvent the BIP of the sugar industry. In that response, it was stated that the Chairmen of Dangote Industries Limited and Flour Mills of Nigeria Plc, seeing the level of investments by The BUA Group in its Port Harcourt project, which employs over 1,000 Nigerians and has expended over $250 million on the project were unhappy, especially as they felt the project would break their monopoly and affect their market by driving price of sugar downwards for Nigerians.
In its response, The BUA Group also revealed that before the Muslim Ramadan fasting, sugar was sold 18,000 Naira per bag, but as the Ramadan fasting period commenced, the price of sugar rose to 30,000 Naira per bag. The BUA Group maintains that the increase in sugar price during Ramadan and other festive periods by Dangote Industries Limited is needless, raising concern on the exploitative act of increasing prices of its products arbitrarily particularly, when there is demand leaving helpless Nigerians without a choice. The BUA Group vowed to frustrate any attempt in creating a monopoly in the sugar industry in Nigeria at this time.
The BUA Group went ahead to assure the Hon. Minister of Industry, Trade and Investment, Niyi Adebayo that its sugar Refinery in Port Harcourt, which focuses on export will not affect howsoever, the Backward Integration Program and added that “the only way it will affect Nigerians is for Nigerians to pay lower prices for sugar.”
The BUA Group at that time explained that, notwithstanding the fact that the Port Harcourt Refinery is mainly for exports, it is permitted under the Nigeria Export Processing Zones Authority Act and current Approvals and Rules to intervene locally in order to stabilize sugar price where it is absolutely necessary in the face of arbitrary price increase and collusion to force scarcity of the product locally. Dangote Industries Limited’s refinery in Lekki is under the Export Processing Zone (EPZ) and enjoys similar benefits like The BUA Group’s sugar Refinery in Port Harcourt.
The BUA Group insisted “What BUA sugar is doing is legal and within the confines of the law. We have not done nor are we doing anything wrong.” The company stated that it was its refusal to join in the needless increase in sugar price that prompted the petition against it.
As aptly put by Chairman of The BUA Group, the Chairmen of Dangote Industries Limited and Flour Mills are questioning the “authority of the president’s power and the diligence of the trade ministry” which is an “…affront to the powers of the president and an attempt to undermine Nigeria and its institutions as well as edge out competition, to gain a monopoly that holds the country to ransom”. Such behavior must be frowned upon and prevented. The BUA Group’s refinery will curb arbitrary price increase by Dangote Industries Limited and Flour Mills amongst other benefits.
The claims against The BUA Group were simply not true. It was indeed a falsehood to claim that The BUA Group’s Port Harcourt export focused refinery in an export zone, which will amount to an undermining of the NSMP. As mentioned by The BUA Group in their response, the project is governed under the NEPZA Act and the free zone approved by the President of the Federal Republic of Nigeria, which gives BUA’s actions legal validity. Under the NEPZA act, companies are allowed to process and sell 100% of their production in Nigeria with payment of duties based on the current raw materials tariffs.
The BUA Group is also adhering to the BIP as can be clearly seen from its establishment of a 20, 000 hectares Lafiagi Sugar Project encompassing a 10,000tpd Sugar Mill, 20,000tpa Sugar Refinery, 20million litres Ethanol Plant and a 35MW Power Plant from Bagasse.
Moreover, The BUA Group happens to be the sole company with a plantation, a sugar mill, a refinery to produce white sugar, and an ethanol plant unlike Dangote or Flour Mill. This is far greater than the combined investments of Dangote Industries Limited and Flour Mill into the sugar industry. Indeed it makes no economic sense for The BUA Group to work against the backward integration policy of the industry, after sinking billions of naira in the initiative, which is almost at completion, as it is scheduled to be completed by the end of the 2021 as well as commence production by 2022.
The Nigerian sugar industry was first established in the 1960s but it is still regarded to be in its infancy given the fact that presently it only supplies over 2% of the nation’s requirement, making it expedient for the operators to expand their capacity and increase production to attain self-sufficiency and reduce import dependency in line with the National Sugar Master Plan. The BUA Group’s action is being driven by the knowledge of the huge potentials in the sugar industry, which has the capacity to turn around the Nigerian economy. The company has placed emphasis on developing its agricultural potential and de-emphasizing import focused investment for the wholesome growth of the domestic economy.
The Nigerian government is aware of the challenges confronting the operators, which are a far cry from the contents of the petition levied against The BUA Group. The immediate past Executive Secretary/Chief Executive Officer of National Sugar Development Council, Dr. Latif Busari, once lamented that port congestion and lack of funds may militate against the overall progress towards achieving the target for sugar production in the country.
Dr. Busari stated further; “the BUA project in Lafiagi, had their consignment imported and was hooked up – even the one for Savannah – was hooked up for almost eight months at Apapa Port, no way out.”
One would have hoped that the operators of the sugar industry would have closed ranks and collectively confronted the common challenges facing the industry. This may not be so because the focus seemed to be on The BUA Group specifically and it appears to go beyond the sugar production to all spheres of its operations.
As it has been described, monopolies are a hydra headed monster. It is common knowledge monopolies cause economic abuse and domination and undermine freedom. And as is whispered in the corridors of the Big Business Industry, certain major players have a notorious history, propensity and is well known for bullying and strong-arming competition out of business. Scheming viable competitors out of business is and has been their legendary antecedent.
Many instances thrive in the cement industry with the hostile takeover of the limestone deposits of a competing entity. Another instance is alleged to be be in the case of Ibeto, whose business was almost killed ‘but-for’ the speedy intervention of the then President Umaru Musa Yar’Adua and another example is said to be in the case of the Polo House Jetty in Tincan Island, Lagos where a license was revoked by the Nigerian Ports Authority and reallocated same day.
There is an urban legend that the petty intrigues that it looks like Dangote Industries Limited allegedly incites against The BUA Group are the former’s interest in getting rid of competitors by purportedly authorizing frivolous claims against The BUA Group in order to maintain the monster of monopoly. The belief is that Dangote Industries Limited doesn’t want to be a big fish in a small pond. It wants to be the ONLY fish in the big pond.
The spiel on Social Media is that Dangote Industries Limited doesn’t want to beat new competitors on the merits of their product and services but rather it wants to use government regulation to make it impossible for those new competitors to put up any competition at all.
And on the streets, in the markets, among the masses, the general consensus is that, as humungous and far ahead as Dangote Industries Limited is, it is insecure by the growth of The BUA Group and intimidated by the prospect that it is almost on the verge of leveling up to its success. This notion has rubbed the masses the wrong way because, away from business and the dispute that has just been resolved, the Chairman of The BUA Group has been identified as a reputable philanthropist who uses his BUA Foundation for philanthropic activities, in education, health, and social development. The wealth that he has amassed truly touches the lives of the most vulnerable in the society because he remains a proper gentleman who is sympathetic to the plight of fellow Nigerians. From both his business and philanthropic activities, it is clear that he maintains no interest in making life onerous for Nigerians as all his actions have always been geared towards good. These are not one’s opinions; these are the ‘Word on the street!’
To the naked eye, it really does appear that the fear is that The BUA Group is on the verge of out-innovating the other competitors. This, however, should not have been a reason for fellow industry players to recommend any sanction against The BUA group. Rather, it should stimulate a spirit of healthy competition resulting in greater economic activities that will serve as a springboard for the nation to leap onto a higher growth of her Gross Domestic Product (GDP).
It is all about competition between the big names in the Nigerian economic front. Competition in business may not be wrong but unhealthy competition is always counterproductive. Nigeria needs unity and cohesion among the drivers of the private sector to make progress economically. Any attempt at creating the hydra headed monster of monopoly in the Nigerian economy at this time will choke the nation. The masses must be considered at all times when policies are made and decisions are taken about the Nigerian market.
Economists will always tell us that concentration of market power amounts to gumming up the economy and is largely to blame for decades of flat wages and weak productivity growth. Competition is an economic lubricant. The machine works more efficiently when all the parts move freely. We get more output from the same input or the same output with less input, take away competition and it all begins to grind together. Eventually, friction brings it to a halt – sometimes a fiery one.
The need for the private sector to drive the nation’s economy cannot be over emphasized if we are serious about toeing the path of growth. During the commissioning of the National Sugar Institute in Ilorin, the Minister of Industry, Trade and Investment stated thus, “the government, therefore recognizes the need to deepen the partnership with the private sector to drive access to skills development in a manner that promotes competition, productivity, profitability in the sugar industry.”
Government must be vigilant and act within the province of extant legislation in its regulatory duties. Government must endeavor, at all times, to discourage the politics in the agricultural and manufacturing industries capable of undermining its genuine strides to get the economy back on track. No operator in the industry must be allowed to use their might or business affinity with government to take over the regulation of the industry which legally is the function of government. Government has a bounden duty to accord all industry players and their businesses equal protection if we are serious about development the economy. It is without doubt that the state of the Nigerian economy at any point in time is a reflection of the choices/decisions of policies makers and as such government must take into consideration appropriate signals to implement the right policy decisions in the interest of all.
The BUA Group should continue to be steadfast in providing healthy competition in the economy. It will not come without a price. There are so many battles to be fought and The BUA Group should continue to be on the side of the people by acting as a price stabilizer and a slayer of monsters. The BUA Group should continue to fight against artificial scarcity of products that will tend to place needless burden on the consumers.
To other industry players one sincerely hopes that there should be healthy competition and all the major players should regard themselves as partners in the development of the economy. All must play the game fairly, even when working severally, in the interest of our people. It is in the interest of Nigeria and Nigerians to let The BUA Group be as it fights for the welfare of Nigerians.
The battle to break the hydra headed monster of Monopoly that geared its ugly head during the recent sugar dispute is reminiscent of the great hero of the past who performed extraordinary feats of strength, courage, and devotion.
While in Greek Mythology, Perseus used a polished shield for a mirror in order to cut off the head of its own hydra headed monster, Medusa, The BUA Group perfectly fits the standard of Greek heroes, established by its actions of confronting and killing of the hydra headed monster of monopolies and oligopolies in this most recent… Clash Of The Titans!