Home Latest Insights | News Understanding Conglomerate Tax, Accumulation of Capability and Dangote Group’s EFCC Raids

Understanding Conglomerate Tax, Accumulation of Capability and Dangote Group’s EFCC Raids

Understanding Conglomerate Tax, Accumulation of Capability and Dangote Group’s EFCC Raids

Good People, please do not confuse my construct of Conglomerate Tax with what is happening in Dangote Group as EFCC raids. Sure, I have posited that nations and citizens pay special “taxes” to conglomerates around the world because they typically have the capacities to address upstream challenges which nations want addressed. In other words, while a spare parts seller in Nigeria may not get import duty waivers, Nigeria could decide to waive duties for an automotive company bringing in industrial equipment.

My thesis is that conglomerate tax is part of the global market system, and in my book, I cited many examples. When Amazon wanted to build a second headquarters, many American cities offered it $billions on tax waivers; I am not sure small businesses in Virginia and New York would be that lucky. Boeing until recently was getting $100 million yearly from the state of Washington. Of course, in Nigeria, Dangote Group, Nigeria’s largest conglomerate, gets many goodies.

My position to a large extent is straightforward: “if you have $5bn to invest in Nigeria and you have money to rent my brain, my advisory package will include getting some major concessions from the government for you. I have called that conglomerate tax and it is global (Amazon HQ2 got $billions of waivers from US cities, etc). Dangote’s problem is that he is alone doing production things in Nigeria, and that is why we have the jealousy from many who do not understand how markets work. There is no businessman or woman with $10bn to invest that will not ask for special treatment. Not doing so is stupidity.” 

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The piece was written many years ago, and should not be used to justify any alleged issues Dangote Group may have with the government on foreign currency. Dangote Refinery possibly got special treatments on US dollars to bring in machines into Nigeria. Yet, there is going to be an examination where those special treatments could constitute “illegality”  on what is fair for even a big conglomerate. EFCC cannot be raiding Dangote Group because it received special FX treatments, it is possibly evaluating the big picture because indeed Dangote Refinery, for investing $billions, should be expected to get special FX considerations.

So, the BusinessDay piece which quoted me got it a little out of context: my construct of conglomerate tax does not justify illegality.  I have built this construct on my theory of the Accumulation of Capability which notes that as companies accumulate capabilities across different domains, operating at the upstream level, they exert influence on governments, making it possible for them to get concessions and waivers, in ways companies which operate at the downstream level (ordinary, mundane and largely undifferentiated services) cannot. Dangote Refinery met many requirements to exert those taxes on Nigeria! But even as it does, there is always a determination when that privilege could become a poison to the economy.

Companies must develop and accumulate capabilities in order to compete in the marketplace. In this video, I explain how any firm can do that and why accumulating capability is very strategic. From Google to Dangote Group, when companies accumulate capabilities, they see themselves operating in the segments of markets with higher value (usually upstream) compared with where their competitors operate (usually downstream). Dangote Group can deploy massive assets and technical know-how in cement production, making it harder for new entrants and rivals.

Please read my book titled The Dangote System: Techniques for Building Conglomerates to understand my constructs on conglomerate tax and the accumulation of capabilities very well. Yes, they are not blank cheques to disarm economies.

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One of the reasons I like reading Prof Ndubuusi Ekekwe posts is because he endeavours to speak the ugly truth that most of us don’t like to hear. In 2016 after Dangote unveiled his plan for the 650bpd mega refinery project and approached the CBN, the CBN publicly said it would lend it’s support to assist Dangote with special access to FX to facilitate the laudable project which would save country about $30 billion in FX gains, and provide over 135,000 permanent jobs.

What country on earth wouldn’t give special support in the form of waivers, tax breaks, special discounts etc to such an investor? I laugh when I hear people say Dangote is receiving special favours from government, and that government should level the playing field.? Like prof rightly pointed out, this is a global practice meant to attract and retain major investors.

In Apiril 2023, the world’s largest advanced micro chip maker TSMC requested for $15 billion in support from the US government in the form of tax credit and are expected to ask for another $7 billion in government grants. Why? Because they’re building a chip manufacturing plant in Arizona USA according to Wall Street journal. TSMC a Taiwanese company hopes to use US government money for its project.


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2 THOUGHTS ON Understanding Conglomerate Tax, Accumulation of Capability and Dangote Group’s EFCC Raids

  1. It is injustice to treat equals as unequal, and it is also injustice to treat unequals as equal. This pretty much summarizes how to understand these things, it does not rely on ignorance of many or wisdom of few to make sense anyway.

    There can be valid debates around whether special Fx treatment was used for intended purposes or abuse of privileges was suspected, anything outside these is just hot air. It is not on social forums that you determine whether a conglomerate deserves special benefits or treatments, because the wisdom of the crowd is irrelevant in such cases.

    What is noticeable is that our environment is dominated by people who are high on talks but very low on capabilities, so the lure to over dramatize events is quite strong. Was it possible for the EFCC to reach out to Dangote Group without public knowledge? Very possible, but again, the government of the day needs to ‘show working’, which is essentially pure drama, since nothing much is happening in real governance.

    Our space is still high on ignorance, so expect all manner of people offering opinions on things that only those with requisite knowledge should be commenting on. It’s still like questioning why government should bail out banks, until it doesn’t…

    • Exactly Francis. I opined that the EFCC Should do it’s job properly and Conduct a Just investigation into the Dango FX Deals. It’s not for Dangite to Clear the Air through Media Outlets, what ever the Chairman of Dangite Group says would be to Defend it self, naturally. Let the Investigation go on and with results.

      Again, Dangote Group isn’t the only Big Consumer Manufacturer, others should be given the same Concessions.

      Honestly, I see Dangote Group as a machinery to every Government of the Day, starting from the IBB Regime to Buhari Era. Tinubu’s Government is the only Government that doesn’t care about any Dangote Group, because there are a lot of Dangote’s around Nigeria.

      I keep on telling people that any body could be a Dangote given the same Privilege. Bua is the Conglomerate that is impressive, with or without concessions, the Group have been beating all expectations.

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