US embassy cable - 05LAGOS362

C O N F I D E N T I A L SECTION 01 OF 03 LAGOS 000362 
 
SIPDIS 
 
STATE FOR EXIM, OPIC, USTR 
 
E.O. 12958: DECL: 03/07/2015 
TAGS: ETRD, EINV, ECON, NI, PINR, BEXP, PGOV 
SUBJECT: ALIKO DANGOTE AND WHY YOU SHOULD KNOW ABOUT HIM 
 
Classified By: Consul General Brian Browne for reasons 1.4 (b) and (d). 
 
1. (C) Summary.  Alhaji Aliko Dangote (Dangote) is Nigeria's 
most well known businessperson and may be its wealthiest 
citizen.  He has taken on the aura of an economic folk hero 
for some, villain for others.  To supporters, he symbolizes 
that Nigeria can do more than barter and trade.  It can 
succeed in manufacturing.  To detractors, he is a predator 
using connections in a corrupt political economy to tilt the 
playing field in his favor and sideline potential competition. 
  The truth resides somewhere between these caricatures. 
Dangote is counted among President Obasanjo's inner circle of 
business advisors.  It is no coincidence that many products 
on 
Nigeria's import ban lists are items in which Dangote has 
major interests. 
 
2. (C) Summary Cont'd: Although an undiluted success in terms 
of wealth accumulation, Dangote personifies the duality in 
Nigeria's economy.  This duality presents a dilemma for US 
economic policy.  On one hand, Dangote imports significant 
amounts of US produce and equipment for his manufacturing 
ventures.   On the other, he has had success blocking trade 
and investment that might compete with his enterprises. 
Weighing everything in the balance, we believe the Dangote 
model is harmful to Nigerian and American interests in the 
long run.  Unfortunately, the Dangote model will likely be 
the one most emulated until its beggar-thy-countrymen 
contradictions become more apparent.  End summary. 
 
------------------- 
DANGOTE THE COMPANY 
------------------- 
 
3. (U) Alhaji Aliko Dangote (Dangote) is founder, president 
and CEO of Nigeria's largest national company, Dangote Group 
 of Companies (the Group).  Dangote's wealth and prestige are 
 based on his family connections and political friendships 
yet he is esteemed by many Nigerians for his business 
acumen.  He has led the Dangote Group of Companies (the 
Group) to unprecedented success in Nigeria, starting the 
company as a trading entity in 1977 and growing it to an 
estimated USD 700 million manufacturing or semi- 
manufacturing behemoth that it is today. 
 
4. (U) The Group is a household name in Nigeria and comes 
closer than any Nigerian company to market domination in 
many sectors.  The Group employs roughly 10,000 Nigerians 
and turns over a profit estimated at USD 1.3 billion. It 
runs 15 manufacturing and bagging facilities nationwide and 
 has operations in industries as wide ranging as cement, 
sugar, wheat, textiles, polypropylene sacks, and property 
leasing.  Part of the Dangote business strategy is to focus 
 on provision of basic human needs: food, shelter, and 
clothing. 
 
5. (C) In each industry, the Dangote Group has been able 
to climb from zero production at market entry to become a 
top producer in a relatively brief period.  Sugar refining 
 began in 1999 and today the Group manufactures an 
estimated 100 percent of Nigeria's sugar consumption needs. 
  In cement, the Group reports it started from zero 
importation of production inputs five years ago to today 
importing between 3.5 and 4.0 million tons each year, 
comprising 50 percent of imported cement into Nigeria and 
40 percent of the total cement market in Nigeria.  A 
Dangote manager told AgAttache and Econoff the Group's goal 
 is to dominate every sector in which it operates.  He also 
 proclaimed its willingness to play hardball to reach its 
goal. 
 
--------------------------------------------- -------- 
FROM TRADING TO MANUFACTURING -- THE DANGOTE AND GON 
SHARED DREAM 
--------------------------------------------- -------- 
 
6. (U) Most Nigerian businesses and businesspeople focus on 
trading.  Until about five years ago, Dangote was no 
different.  As the Group developed, however, Dangote saw 
that if he could build manufacturing capability he could 
gain control over a larger portion of what went into 
Dangote products, and thus a larger portion of the profits. 
  Adding value to imported inputs (what we deem "semi- 
manufacturing") became a lucrative niche for the Group. 
For example, the Group imports inputs for cement and then 
processes and bags it.  The Group will probably further 
develop its manufacturing capacity.  The cement factory it 
is currently building in Kogi State is located directly over 
 a large limestone deposit that could be used as cement 
input. 
 
7. (C) Dangote's shift toward manufacturing accords with 
the GON's nationalistic economic policies, which place a 
premium on domestic manufacturing and production.  What we 
don't know is whether Dangote and others like him helped 
drive the policy or whether their actions were driven by 
the government policy.  Reality is probably a mixture of 
both. 
 
8. (C) In part, because of this shared dream, the Government 
 has been very supportive of Dangote.  We know the company 
at one time or another held exclusive import rights in 
sugar, cement, and rice using such advantages to do volume 
business and undercut competitors.  In a December 1996 
interview, Aliko Dangote admitted that a government mandate 
once forced him to import so much rice that the local 
market crashed by almost 80 percent.  The direction of GON 
trade barriers also suggests preferential treatment.  High 
tariffs or outright bans on imported items favor the Group 
in nearly all areas in which they do business including 
wheat flour, cement, certain textiles, sugar and pasta. 
 
9. (C) Further, the GON is normally slow in privatizing 
state-owned production facilities.  Yet the Dangote Group 
swiftly won bids on GON-owned manufacturing installations 
such as the Benue Cement Company and the Savannah Sugar 
Company, and constructed its own berth at GON-owned Apapa 
port in Lagos where ships with production inputs offload 
directly at the Dangote Group factory. 
 
--------------------------------------------- 
Early and Easy Access to Political Favoritism 
--------------------------------------------- 
 
10. (U) Dangote is revered for his assumed rise from rags 
to riches but his family connections reveal a privileged 
beginning.  Dangote is from the prominent Dantata family of 
Kano State.  The Dantata family made its name and wealth in 
 commodity trading.  When in his early twenties Dangote 
showed promise as a young businessperson, his uncle Sanusi 
Dantata loaned him naira 500,000 (at the time worth USD 
500,000) to start out on his own. 
 
11. (C) Because of their influence in the Hausa and Muslim 
communities, Dangote and Dantata have always been useful to 
 both the civilian and military leaders who ruled Nigeria. 
  Dangote enjoyed GON favoritism in the form of importing 
rights throughout the military regimes and coups of the 
1980s and 90s.  Though he has connections with political 
figures throughout the country, his link to Obasanjo (OBJ) 
 paid off when OBJ was elected president in 1999.  Since 
then, Dangote's market advantages and growth have 
multiplied. 
 
12. (C) Dangote purportedly contributed 200 million naira 
(about $1.5 million at the time) to Obasanjo's first 
election campaign, and in 2003 at least another one billion 
 naira (about USD 7.5 million) for the second term. 
Dangote is a known contributor to the PDP party.  He is a 
close friend with the governors of Kwara, Kogi, and Ogun 
states.  He also enjoys support from the Sokoto Caliphate, 
 the spiritual and political seat of power of Muslims and 
members of the Hausa tribe. 
 
--------------------------------------------- ----------- 
Nigeria's Dangote Paradigm Stands in the Way of Economic 
Liberalization and Democracy 
--------------------------------------------- ----------- 
 
13. (C) The special relationship Dangote holds with the GON 
 defines the Dangote paradigm.  The paradigm demonstrates 
how easily one powerful person can disrupt Nigeria's 
floundering democratic and economic liberalization 
processes.  Along with outright money laundering and 
corruption, the Dangote paradigm is arguably one of the key 
 factors making Nigeria a politically and economically 
volatile country and a risky place to do business. 
 
14. (C) Dangote openly asserts the GON should do more to 
manage the economy through protectionist measures to assist 
 what he calls the "Nigerian Industrial Renaissance."  He 
has no qualms about "alerting the government" or "giving 
direction" in industrial policymaking.  Dangote and some 
members of the GON justify this protectionism with examples 
 such as US corporate and railroad barons and the gilded 
era of the late 1800s.  This, they say, is the way to lay 
the foundation for economic growth, particularly in the 
manufacturing and industrial sectors.  However, these 
alleged historic parallels do not mask the fact that the 
chummy relationship between Dangote and the GON, while 
superficially promoting manufacturing in some sectors, is 
causing destructive and derailing economic activity and 
democracy in other areas. 
 
15. (C) Dangote's obvious unfair advantage and support from 
 the GON are disturbing for US companies wanting to enter a 
 market with over 130 million consumers. Conversely, some 
US companies indirectly benefit from GON restrictions 
protecting the Dangote Group of Companies, adding 
complexity to the Dangote paradigm.  For example, Dangote 
allegedly receives unfair, preferential treatment to 
import bulk commodities.  However, he is a loyal U.S. wheat 
 customer and buys millions of dollars worth of other US 
products.  General Electric makes much of Dangote's 
machinery and the Group will buy about 300 used trucks 
(mostly made by International) from the US this year. 
Further, the Group secured a USD 310,000 grant from the 
Trade Development Agency in 2000 and aspires to a future 
Export-Import Bank loan. 
 
------- 
Comment 
------- 
 
16. (C) Dangote's tremendous popularity and acceptance is 
not likely to diminish.  The average Nigerian considers 
him, and more importantly, his way of doing business, a 
model to be emulated. The fact is, however, the myriad 
preferences the GON has bestowed on the Dangote Group have 
distorted the market in ways that do more harm than good 
over the long haul.  However, the Nigerian Government 
rarely takes a long-term perspective into account.  The 
GON-Dangote relationship has been, at minimal, very chummy 
and mutually accommodating.  Critics of this relationship 
would state that it smacks of insider trading. Dangote does 
 not epitomize the free market at work in Nigeria.  What 
his story reveals is that he is one of the few free- 
wheeling actors in a relatively and artificially closed 
economic environment. 
 
17.  (C) Comment Cont'd:  Herein, lies the dilemma for the 
 U.S. in working with Dangote and, by extension, with the 
Nigerian economy overall.  One the one hand, it makes 
extremely good business sense for U.S. firms to work with 
Dangote and for our agencies such as EXIM and OPIC to do 
so as well.  This promotes U.S. exports and foreign 
investment in Nigeria.  However, the more successful 
Dangote becomes, the more his operation becomes a national 
 business paradigm.  Dangote's evolution, to some degree, 
 represents progress from the almost mercantile 
perspective of many Nigerian businesspeople.  However, he 
 still stands a long way from the free market policies we 
 espouse.  The question is whether Dangote is a 
transitional figure to a more free market mentality or 
will he remain the paragon of business practice here. To 
improve the chances that he will only be a transitional 
figure we need to continue to work with him but exercise 
caution in the relationship while also seeking to work 
more closely with Nigeria's more authentic economic 
reformers. End comment. 
 
BROWNE 
BROWNE