Home Latest Insights | News Why You Must Pay Attention to Dangote Cement and Kogi State Tussle Over Obajana Cement Plant

Why You Must Pay Attention to Dangote Cement and Kogi State Tussle Over Obajana Cement Plant

Why You Must Pay Attention to Dangote Cement and Kogi State Tussle Over Obajana Cement Plant

I have been following the tussle between Dangote Cement Plc and the Kogi State government on Obajana Cement Plant. As someone who sells his time to Boards, CEOs, and business executives, a matter like that educates and informs me. I have received the Kogi State response. Take time to read it (PDF). Dangote Cement Plc has also published an advertorial titled “OBAJANA CEMENT PLANT: SEPARATING FACTS FROM FICTION”, reproduced below from ThisDay. Pay attention to what is happening and how the court is going to rule.

This will change the contracting and agreements of the future. Dangote Cement is partly arguing on the land and investments while the state is focusing on the initial discovery investment of the limestone. But notice that if we extrapolate the oil and gas ordinance to solid minerals, only the federal government should own the assets (here, limestone). I will be looking at how the court rules. 

Kogi state said it started the business. Dangote Cement said it owns it 100%. And Kogi State is asking to show evidence that it paid for its state. We need to understand that Nigeria has this system where communities ask you to take everything provided you can develop assets, create jobs and boost the local economy. Going ahead without insisting on paying even N1.000 to that community or government is a bad call.

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Dangote: Our Acquisition of Obajana Cement Plant Followed Due Process

•Says Obajana Cement was incorporated in 1992 and as at 2002 had no paid up shares 

•Declares Kogi State had no equity interest in Obajana Cement 

•Plant, machinery were conceived, designed, procured, built, and paid for solely by DIL, well after it acquired the shares in Obajana Cement, Dangote insists 

•Taxes paid to Kogi govt yearly since production commenced in 2007 

•Company’s support in Kogi massive, impactful, host communities say

Oluchi Chibuzor and Ibrahim Oyewale in Lokoja

Dangote Industries Limited (DIL) has insisted that its acquisition of the Obajana Cement Plc in 2002 followed due process, contrary to claims by the Kogi State government.

The conglomerate asserted that Kogi State government has no equity interest in Obajana Cement Plc.

It also stated that the company as a responsible corporate organisation has been paying relevant state taxes, levies and charges to the Kogi State government since 2007 when production commenced in the acquired cement plant.

These clarifications were contained in a statement issued by the management of Dangote Industries Limited titled ‘Obajana Cement Plant: Separating Facts from Fiction.’

Kogi State government had last Wednesday sealed Dangote Cement’s factory located in Obajana over alleged tax evasion and equity ownership in an exercise that several staff of the Dangote Cement were pelted with gun bullets.

This had prompted the federal government to wade into the raging dispute between the state government and Dangote Group, with some concerned stakeholders urging both parties to resolve the dispute amicably so as not to discourage potential investors.

However, Dangote explained that the statement it issued yesterday was for the sole purpose of addressing the concerns and apprehensions of stakeholders of Dangote Cement Plc (DCP), especially the over 22,000 people it employs directly, and more indirectly, as well as thousands of contractors, wholesalers, users of the products, its financiers and shareholders.

It pointed out that at a time of significant economic challenges, “that we face as a nation, we believe all must be done to keep our economy running effectively, our people employed, businesses that depend on us thriving and not discourage those who take the risks of needed, lawful and significant investments in our economy. The shutdown of our plant has materially jeopardised the economic wellbeing of our country without any regard for its significant consequences.

“Whilst reserving our rights to proceed to arbitration in accordance with the extant agreement, we have reported the unlawful invasion by KSG and the consequential adverse effects of same to all the relevant authorities, including the Federal Government of Nigeria who has now intervened in the matter.

“It is hoped that the dispute resolution process we have initiated will quickly resolve the disputes and allow us to focus on our business without distraction and continue our significant contribution to our national economy. It is in this context that we state in brief as follows”, the company added.

According to the statement, the Obajana Cement Plant was one of the most critical components of economic activity in the nation, being one of the highest taxpayers, and vehicle for one of the largest companies invested in by thousands of Nigerian and foreign investors.

It noted that the company’s most important assets were its land, the plant and machinery thereon, and the vast limestone deposit covered by mining leases issued under licence by the federal government.

The company clarified that the land on which Obajana Cement Plant was built was solely acquired by Dangote Industries Limited (DIL) in 2003.

“The land on which the Obajana Cement Plant is built was acquired solely by Dangote Industries Limited (DIL) in 2003, well after it had acquired the shares in Obajana Cement Company in 2002, following the legally binding agreement it entered into with KSG to invest in Kogi State. DIL was issued three Certificates of Occupancy in its name after payment of necessary fees and compensation to landowners.

“The plant and machinery were conceived, designed, procured, built, and paid for solely by DIL, again, well after it acquired the shares in Obajana Cement Company. The limestone and other minerals used by the Obajana Cement Plant, by the provisions of the Nigerian Constitution belonged to the Federation, with authority only in the FGN and not the State in which the minerals are situated, to grant licences to extract and mine the resources”, the company explained.

“After the agreement with the KSG, DIL applied for and obtained mining leases over the said limestone from FGN, at its cost and has complied with the terms of the leases since inception. The Government of Kogi State had no minerals to give, had no assets to give, and only invited DIL as most responsible governments do to come into the State and invest in a manner that will create employment, develop the State, and earn it taxes”, the statement added.

In a section of the statement titled, ‘The Incorporation of OCP and the Invitation by KSG’, the company noted that, “In 1992, the Kogi State Government incorporated Obajana Cement PLC (OCP) as a public limited liability company. Sometime in early 2002, about 10 years after the incorporation of the OCP (which still had no assets or operations as of that time), KSG invited Dangote Industries Limited (DIL) to take the opportunity of the significant limestone deposit in the State by establishing a cement plant in the state.

“Following several engagements and assessment of the viability of the proposed opportunity, DIL agreed that it would establish a cement plant in Kogi State and provide the entirety of the substantial capital required for the investment.

“DIL also agreed, following a specific request by KSG, to use the OCP name (albeit only existing on paper as of that time, and without any assets or operations) for the time being, as the vehicle for this investment.

“On July 30, 2002, KSG and DIL entered into a binding agreement to document their understanding. The agreement was amended in 2003 and remains binding on, and legally enforceable by, the parties to same,” the statement explained.

On the issue of an agreement between Dangote and Kogi State Government, the statement gave a summary.

It noted that “it was agreed, inter alia, that: DIL would establish a cement plant with a capacity of 3,500,000 metric tonnes per annum; DIL shall hold 100% of the shareholding in OCP, and source for all the funds required to develop the cement plant; KSG shall have the option to acquire five per cent equity shareholding in OCP within 5 years; and KSG shall grant tax relief and exemption from levies and other charges by KSG for a period of seven years from the date of commencement of production.”

“Consistent with the terms of agreement, DIL sourced for 100% of the funds that was used to develop the plant without any contribution from KSG. In line with its rights, ensuring alignment with the Dangote Brand, as part of internal restructuring and for better market recognition the name of OCP was changed to Dangote Cement Plc in 2010, and a number of other significant cement companies (such as the Benue Cement Company) owned by DIL were merged with OCP to become the enlarged Dangote Cement Plc”, the statement added.

On the issues of ‘Execution of the Agreement: The Plant, Taxes, Shares & Dividends’, the statement noted, “DIL assiduously and at significant cost met all the terms of the agreement between it and KSG in relation to OCP. It built the cement factory, much bigger and better than envisaged.

“KSG could not meet its financial obligations of contributing to the funding the plant in any form; neither could KSG fund acquisition of five per cent equity shares in OCP when it was asked on a number of occasions to exercise the purchase option.

“KSG also did not meet its obligations to grant waiver of taxes, charges and levies that it could charge the operations, affairs and activities of OCP. Rather despite being entitled (under the terms of the agreement with KSG) to tax relief and exemption from charges and levies by KSG for a period of seven years from the date of commencement of production, OCP (and now DCP) has paid all due sub-sovereign taxes, levies and charges to KSG since it commenced production in 2007.

“KSG does not have any form of investment or equity stake in OCP, so no dividend or other economic and/or shareholding rights whatsoever could have accrued to it from the operations of the company”, the statement added.

On the issue of the Acquisition of the Plant Site, the statement noted that, “After the agreement between DIL and KSG in 2002, DIL in 2003, applied to KSG for the acquisition of land for the plant site, and this application was granted with the issuance of three Certificates of Occupancy to DIL.

“DIL to the knowledge of KSG, paid substantive compensation to Obajana Farmland Owners located within the two square kilometres plant site.

“Subsequently, in September 2004, DIL, in good faith, applied to the State Governor for the statutory consent for DIL to assign the plant site to OCP being DIL’s investment vehicle. This consent request was granted by the State Governor and the appropriate consent fees were paid by DIL,” it added.

Shedding more light on the company’s engagement with Kogi State Government, the statement explained that, “The investment of DIL in Kogi State through OCP was at the instance of the duly constituted government of Kogi State, done in accordance with the law of the State and all enabling laws in that regard, and the transaction documents were effectively, lawfully and duly executed by the Governor and Attorney General of the State (at the time), after internal approvals were obtained within the government.

“Since the inception of Alhaji Yahaya Bello’s administration in 2016, and regardless that government is a continuum, we have had series of enquiries about the ownership structure of the Dangote Cement Plc as it relates to the alleged interest of KSG; and had several engagements with the officers of the State government including Governor Yahaya Bello. At all of these engagements we have provided all the details and information supported by relevant documents, required by the Government and the State House of Assembly to confirm our lawful investment.

“For instance, in 2017, we were invited by the Judicial Commission of Inquiry, and we made our submission to the commission with relevant documents to support our position.

“We are yet to receive any feedback from the Judicial Commission of Inquiry. While still waiting to hear of the report of the Inquiry, we were invited by the State House of Assembly on the same matter earlier this year, and again, we provided evidence in support of our position that KSG does not have any equity or other interest in OCP or DCP.”

It added: “On Wednesday, October 5, 2022, hundreds of dangerously armed men, other than law enforcement officers, attacked our cement plant in Obajana, Kogi State, destroyed our property, inflicted grievous injuries on many of our employees, and shutdown operations at the plant. KSG has admitted that the armed invaders acted on its instructions, and in furtherance of the recent enquiry by the Kogi State House of Assembly in connection with the ownership of the Obajana Cement Plant.

“Curiously, on 6 October 2022, a day after the shutdown of our facility in Obajana on the orders of KSG, Governor Bello addressed the public and announced that a Specialised Technical Committee which was set up as part of the recommendations of the Judicial Commission of Inquiry had just presented its recommendations, which have been accepted by KSG. This statement makes it abundantly clear that the shutdown of DCP’s plant occurred regardless of the Governor’s own confirmation that implementation of the recommendations of the Specialised Technical Committee was still pending,” the statement noted.

Focusing on the current state of play, the company said, “Whilst we do not want to speculate on the motivation for the spurious claims being made by KSG in relation to the ownership of the Company, which have resulted in the unfortunate unlawful forcible closure and damage of our plant, and injury of several people, we condemn in strongest possible terms, the unlawful shutdown of our plant by KSG sponsored armed-thugs, the damage to our property (including the looting of large sum of money kept in the office), and grievous injury inflicted on our employees by them.

“This disruption of operations at the plant has caused loss of revenue not only to our company and its customers but has also adversely impacted revenue due to both the federal and state governments. It has also occasioned loss of jobs for the teeming youths who are daily paid workers that throng our plant for their daily sustenance.”

Appealing for overall peace and calm, the statement noted, “We implore all our stakeholders, namely shareholders, customers, suppliers, employees, and the entire community of Obajana and Kogi State at large to remain calm while we follow the legitimate and lawful process to resolve this matter.

“We shall keep our stakeholders duly updated whilst we remain confident that the statutory and contractual rights of DIL shall be upheld by these legal processes which we have initiated.”

Company’s support in Kogi massive, impactful, host communities say

Meanwhile, despite the current face-off between Kogi State and Dangote group, the  beneficiaries of the intervention schemes of the Dangote Cement, Obajana Plant have described the support by the company as massive and impactful.

This was contained a statement made available to journalists in Lokoja yesterday.

The schemes, according to the leaders of the communities and informed sources run into several billions of naira.

A recent report from an independent vox populi to gauge the level of intervention had confirmed that the company enjoys robust relations with host communities, and had just signed a workable Community Development Agreement (CDA).

Respondents from the survey spoke glowingly of the multi-million health facility at Iwaa Community built by the DCP Obajana.

The company added: “The contribution of the company to the development of the state are too numerous to list. Is it the job opportunities created? Is it the support in health sector, road infrastructure, education, financial empowerment, and rural electrification?”

The Dangote Cement Plc had just recently completed a well-furnished multi-million naira hospital at Iwaa, and as well completed the multi-billion naira Nigeria’s longest concrete road between Obajana and Kabba, a statement from the company disclosed.

“These twin interventions have really supported both the state and the federal government in the areas of health and road infrastructure,” the statement added.

The company said most of the CSR schemes were contained in the mutually agreed Community Development Agreement (CDA).

Also, the Dangote Group is building a multi-million naira skill acquisition centre in Lokoja.

When completed, a source said, it would provide the requisite skills and thus empower the youth to be productive and contribute to the economic development of the state.

Members of the communities who spoke during the survey said the Obajana-Kabba concrete road has greatly eased mobility, while describing it as the most important road in the state.

During the 2012 flood, the company had contributed N430 million.

During the signing ceremony of the latest CDA, the mining communities spoke glowingly of the company, while expressing their appreciation and the smooth relation.

As part of its CSR in Kogi State, Dangote Cement had doled out several millions of naira to cooperative groups in the four communities.

The traditional leader spoke glowingly of Alhaji Aliko Dangote, describing him as God’s sent, adding that his contribution to the people of Kogi State could not be quantified.

The statement said the company supported the state in building magistrate court and judges residences in the state.

Other areas of interventions in the communities are: the construction of numerous boreholes, granting of yearly scholarship, electric power supply communities, employment opportunities, building of schools, library construction, supply of modern furniture to schools and rehabilitations of internal roads.

The company had donated tricycles to its host communities to enhance their capacity to connect each other with less stress. The beneficiary communities are: Obajana, Apata, Iwaa and Oyo.


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5 THOUGHTS ON Why You Must Pay Attention to Dangote Cement and Kogi State Tussle Over Obajana Cement Plant

  1. From my understanding, DIL is saying it has nothing to do with KSG. Limestone belong to FG n it had acquired lease license from FG. Regarding the land, based on this narration, DIL requested for land from KSG and d land was given with compensation paid to land user.
    We need explanation on Akpa coal mining DL

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