Dangote refinery: Profit-making or public responsibility?

Since the start of production of the Dangote refinery, the level of authority between the company and the government has become more confusing. The back-and-forth between the government, the Nigerian National Petroleum Company Limited (NNPCL) and the oil marketers has muddled the waters even further. As things stand, nobody knows who should be responsible for […]

Since the start of production of the Dangote refinery, the level of authority between the company and the government has become more confusing. The back-and-forth between the government, the Nigerian National Petroleum Company Limited (NNPCL) and the oil marketers has muddled the waters even further. As things stand, nobody knows who should be responsible for delivering what the people want—making the pump price of petrol cheaper.

At first, the government announced that the NNPCL had agreed to distribute petrol, which would only be sold to NNPC. Then, a few days later, they changed their position. This frustrated the Independent Petroleum Marketers Association (IPMAN), by threatening to stop operations nationwide following the high cost of petrol. Here, the government is failing in one of its primary responsibilities—to create ways for economic activities to occur.

The worrisome thing is that the administrators of this Tinubu-led government are shying away from their duty—improving the welfare of citizens. This is more evident since this government announced the removal of subsidy. The government has, more or less, adopted the idea of getting the private sector to pay for upfront costs, which the government pays later. It is desirable to the government because it is suitable for the public balance sheet and debt, because it all theoretically sits with the private sector. This worked so well until Dangote chose not to play ball with the government.

The concept of shifting responsibilities to the private sector and advocating less government intervention is not sustainable. This usually works for a short period but eventually collapses, as seen in history. Again, the sour relationship between the Dangote refinery, the oil marketers, and the Nigerian government is evidence that business leaders from the private sector should not be responsible for public policies. These are the responsibilities of the government authorities, and pushing them to be involved in these roles will include bypassing the political processes.

We must accept that the company executive of Dangote refinery is an employee of the shareholders and is directly responsible to his employers. We hear him, now and then, take the position of a policymaker to argue for subsidy removal. His justification is similar to Tinubu’s—that there are smuggling gangs who smuggle subsidised petrol to other countries. Logic tells us this is a profit-oriented excuse, and the government should first worry about the economy and people’s welfare. Besides, Dangote is neither a politician nor an official. So, he should not dictate government policies. If he does, it is because it favours his business objectives.

So, what exactly is Dangote’s business responsibility? The responsibility of Dangote refinery’s CEO is to make as much money as possible for his shareholders within the confines of the law. To put it bluntly, his primary objective is to make as much profit as possible for his owners. He is not a Nigerian politician, but he needs them.

Let’s not forget that company executives have a conscience—they are people like us, too. They can be interested in political and social issues. So, Dangote may assume responsibilities for his family, hometown, alma mater, or country. He can feel compelled by these responsibilities to spend money on well-intentioned causes, like feeding the poor, building mosques in his hometown, providing scholarships to particular groups, and other charitable giving around the country. We can think of these responsibilities as social responsibilities.

However, these social responsibilities, supposedly by Dangote, could make some political acts that are against the interests of his employers. For example, he may consider lowering the price of petrol to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of his shareholders. Or he may go against the expense of company objectives to employ workers using a quota system instead of competency so that they can contribute to the social objective of reducing poverty in the communities he operates.

It is worth noting that as an executive, Dangote will have to spend someone else’s money for a general social interest. If he works toward social responsibility instead of profit-making, he will be reducing the returns of his shareholders, therefore spending his shareholders’ money. But if he works towards increasing petrol prices, he will be spending the customers’ money. If he works towards reducing the salaries of his workers, he will be spending his workers’ money. In effect, whatever action Dangote carries out, he is imposing taxes, on the one hand, and deciding how the tax proceeds shall be spent on the other.

Indeed, this practice is not uncommon across other corporations. Whenever a business leader appears publicly for scrutiny, we hear them say they have a social conscience. They convince us that their business is not obsessed with profit-making. You listen to them repeat how seriously they take their responsibilities to provide employment, respect the law, and all the relevant catchphrases that make the people nod their heads in agreement. They even sneak the issue of empathising with how the people are affected by the harmful policies of this government. They even promise we will see lower prices within a given time frame.

I want you to remember this: whenever you hear such statements on TV or face-to-face, you must not forget that these business executives only promise to do the work of our legislators, executives, and judiciary. This is why the promise is not sustainable. Unsurprisingly, Dangote went on record to declare that the Dangote refinery was built without government incentives. Of course, we can debunk such a statement with facts. But if we do so, we must step away from believing that people like Dangote, from the private sector, are responsible for creating inflation, improving efficiency, fighting poverty, etc. If not, we risk absolving those obligated to do so.

Sometimes, we cannot help but blame the private sector for not delivering. Even then, we hardly challenge the potential consequences of their promises. For example, on the one hand, Dangote is at the mercy of his shareholders, customers and employees. He is only an expert in running his group of companies; he produces, sells and finances a product. This does not make him an expert on fiscal and monetary policies.

On the other hand, he could be sacked for spending his shareholders’ money, his customers could boycott his products, employees could desert the company, and labour union officials could try to fight against wage reductions, which can lead to strikes and other unfavourable situations. This happened across large corporations. Apple’s board once sacked Steve Jobs for not pursuing their objectives. Bill Gates had to resign from Microsoft to pursue his philanthropic objectives. But if Dangote wants to implement the policies he advocates for, like the fuel subsidy removal, he could resign from the Dangote Group and join Nigerian politics. Of course, we will welcome that.