Dangote Group says Obajana Cement Plant Acquisition Followed Due Process
Dangote Industries Limited (DIL), parent company of Dangote Cement Plc, has maintained that its acquisition of the Obajana Cement Plc in Kogi State in 2002 followed due process, contrary to allegations of unauthorised ownership and shutdown of the cement plant by the Kogi State government as seen recently.
The company also reassured all its stakeholders that it has initiated a dispute resolution process which it hopes will quickly resolve the disputes and allow the company to focus on its business without distraction.
The company stated thus: “Obajana Cement Plant: Separating Facts from Fiction”, Dangote Industries Limited said the shutdown of the Obajana Cement plant “has materially jeopardized the economic wellbeing of our country without any regards to its consequences”, at a time the significance challenges in the economy necessitate that everything be done to keep the economy running effectively and people employed.
Dangote Industries Limited explained 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.
It also noted that the Kogi State government has no equity interest in Obajana Cement Plc, thereby making the closure of the plant an unlawful act, resulting in an adverse impact on the economic wellbeing of the country.
“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.”
“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 the 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,” the company stated.
Dangote described the Obajana Cement Plant as 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.
The company clarified that the land on which Obajana Cement Plant is built was solely acquired by Dangote Industries Limited (DIL) in 2003, following the legally binding agreement it entered into with KSG to invest in Kogi State. Subsequently, DIL was issued three Certificates of Occupancy in its name after payment of necessary fees and compensation to landowners.
The company further explained that 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.
It also clarified that 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.
“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 said.
The Obajana Cement Plant (OCP) was incorporated by the Kogi State government as a public limited liability company in 1992, Dangote explained. Sometime in early 2002, about 10 years after the incorporation of the OCP which still had no assets or operations as of that time, the Kogi State government 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, the company further explained.
“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 30 July 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.
Giving a summary of the agreement between Dangote and Kogi State government, the statement noted that it was agreed among other things that DIL would establish a cement plant with a capacity of 3,500,000 metric tonnes per annum. It was also agreed that DIL shall hold 100 percent of the shareholding in OCP, and source for all the funds required to develop the cement plant.
Both parties further agreed that Kogi State shall have the option to acquire five percent equity shareholding in OCP within five years and would grant tax relief and exemption from levies and other charges to OCP for a period of seven years from the date of commencement of production.
“Consistent with the terms of agreement, DIL sourced for 100 percent 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 execution of the aforementioned agreement, DIL said it had assiduously and at significant cost met all the terms of the agreement between it and Kogi State government in relation to the Obajana Cement Plant. It added that it had built the cement factory, much bigger and better than envisaged.
The company accused the Kogi State government of non-commitment to its financial obligations of contributing to the funding of the plant in any form, noting that the state failed to fund acquisition of five percent 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 for 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.
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“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 said.
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,” Dangote explained.
On the current state of things, the company condemned “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”.
It said the disruption of operations at the plant has caused loss of revenue not only to the company and its customers but has also adversely impacted revenue due to both the federal and state governments. It also noted that it has resulted in loss of jobs for the teeming youths who are daily paid workers that throng the plant for their daily sustenance.
The company implored all its stakeholders including shareholders, customers, suppliers, employees, and the entire community of Obajana and Kogi State to remain calm while it follows the legitimate and lawful process to resolve the 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,” Dangote stated.
