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Exclusive: How Dangote Cement Avoided N64.4 billion Tax Charge In 2016 FY Results



Nairametrics| It’s not every Nigerian company that gets to claim a tax benefit from a Scheme that’s currently under suspension, but that’s exactly what Dangote Cement (Nigeria’s largest listed firm) seems to have done.

Going through the firm’s 2016 Annual report, Nairametrics was struck by a key audit matter flagged by its Auditors Akintola Williams Deloitte on Dangote Cements approach to ‘Assumption of tax holiday in determining tax liability.’

The Auditors noted in their statement that:

In determining the tax liability for the year, the directors at Dangote Cement have assumed that the Ibese production lines 1 – 4 and the Obajana production lines 3&4, both in Nigeria, are eligible for tax holiday (Pioneer holiday).

The Ibese production lines 1&2 and the Obajana production line 3 enjoyed pioneer holidays for three years which expired on 31 December 2014 and 31 December 2015 respectively and require an extension, while the Ibese production lines 3&4 and the Obajana production line 4 are expansion projects requiring Pioneer Status Incentive (PSI) approval with effect from 1 February 2015. This is on the premise that the production lines have met all the necessary requirements to be granted tax holidays.

The Auditors concluded that “An additional tax charge of N64.4 billion (2015: N40.0 billion) would have been incurred by the company if this assumption was not made in determining the tax liability.”

A key concern for us at Nairametrics however was the following statement by Akintola Williams Deloitte:

“In the course of our assessment, we reviewed communications to the company from a relevant government agency which noted that the company’s application for the grant of PSI on the expansion projects will be considered when the current suspension on the PSI Scheme is lifted while the application for extension is currently being reviewed.”

In other words Dangote Cement chose to book the tax credits even though the PSI has been suspended by the current government of Nigeria. Of course, after the auditors allowed it to, themselves relying on the opinion of an unmentioned tax specialist, legal expert and relevant government agency.

The Auditors further went on to make what are presumptuous statements to us saying :

“We do not have any reason to believe that these pioneer status applications will not be approved with effect from the production day as applied for.”

We believe this is material information to shareholders as the Government of President Muhammadu Buhari has made known its intention to close most tax loopholes and grow non-oil taxes.

An additional tax bill of N64.4 billion would have reduced Dangote Cements reported net income to N122.2 billion from N186.624 billion for Full year 2016.

The N64.4 billion amount if paid as taxes could have also helped the FG pay for various infrastructure projects currently ongoing all across Nigeria that would have positively impacted millions of citizens.

It is important to note however that Dangote Cement may not have broken any tax laws going by the auditors opinion. However, the materiality of the amount involved should be factored in when projecting the future value of the company, particularly from a retail investor stand point.

Here is a screenshot of the relevant portion of the audit opinion.

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PAT MELIK is an economist and analyst. He holds a in Economics and an MBA in Finance from the Haub School of Business, Philadelphia, Pennsylvania.MELIK has written more than 300 pieces, analysis and stories on the economy and financial markets that appear regularly on Nairametrics. MELIK’s unique insight was honed during the global financial crises of 2008 in the USA while pursuing his MBA and getting to understand how markets work.MELIK also has a first hand knowledge about trading global stocks, bonds, commodities and derivatives.

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Why there is a massive sell-off of US stocks



Nigerian stocks record worst quarterly drop since 2009

The United States 10-year Treasury yields rose to a new one-year high of  1.5% on Thursday sending the equities market on a bearish run. The US Dow Jones Industrial Average was down 1.5% as of 7.30 pm on Thursday falling by a whopping 500 points. The S&P 500 and NASDAQ were both down 2% and 2.75% respectively ad the sell-offs intensified.

Global bond prices also fell lower on Thursday and investors around the world sold off massively as they feared higher inflation could erode bond yields.

What is going on?

Investors are worried that massive injection of stimulus in the US and in most European countries could trigger higher inflation which will erode profits on bond yields assuming their fears materializes.

US inflation rate for the month of January 2021 was 1.4% the same as the month of December 2020. US inflation was as high as 2.3% a year ago yet investors remain worried. In response to this fear, bond yields have hit multiple one-year highs. This fear is has now spread to the US equities market.

US President Joe Biden is seeking a $1.9 trillion stimulus package which many had hoped will please the market. However, it appears investors are rather afraid that it could trigger a “reflation” eroding whatever positive jolt it could have had on the wider economy.

What this means for your stocks

A rise in interest rates is triggering a massive sell-off in US stocks ad investors fear a return to higher inflation could signal the market could be entering a bearish era. Stocks have hit multi-year highs since January as investors poured in billions of dollars into stocks. If this sell-off persists then investors in US stocks could see the value of their portfolio plummet.

Tech Stocks are particularly affected by the sell-offs with investors dumping heavyweights like Netflix, Tesla, Amazon, Microsoft, Facebook, Google all falling. Meme stocks, an acronym for stocks popular with Reddit and Twitter retail investors have also suffered losses.

Nairametrics SSN  subscribers are advised to track their portfolios accordingly.

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Buharinomics: In Stagflation we trust

We explain why President Buhari is synonymous with stagflation and what he can do to get us out of it.



Military located bandits in kankara, Q1 2020 National Debt report, Buhari finally speaks on NDDC probe, urges NA to act with a sense of urgency,National Human Rights Commission,Presidency bows to pressure, agrees to demand made by EndSARS protesters, Our economy is too fragile to bear another round of lockdown-Buhari, Zarbarmari: Massacre by Boko Haram is nothing short of senseless, barbaric, gruesome and cowardly- Buhari

Economists define stagflation as a period of slow economic growth, high unemployment rate and higher inflation. It is one of the worst kinds of economic state of affairs that often leads to poverty, insecurity and social-economic crisis. It is a sticky economic conundrum that is incredibly difficult to escape from.

The latest data from the National Bureau of Statistics reveal Nigeria barely slipped out of a recession in the 4th quarter of 2020 with a 0.11% GDP Growth rate. Despite being a welcome news, it is the slowest GDP Growth rate on record at least since 2011.

Earlier on, in the same week, the Statistics Bureau also released inflation data for the month of January revealing an inflation rate of 16.47%, the highest since April 2017, and affirming Nigeria’s galloping inflation status.

Nigeria is in a protracted state of stagflation and has been in the state since the Buhari administration came into power in 2015. Nigeria’s Gross Domestic product per quarter has averaged 0.18% in the last 6 years since this administration got elected into power. The Buhari government has also presided over a consumer price index change of 108.6%, meaning that prices of nearly every measurable item have doubled in the last 6 years.

Flashback to the first installment of General Buhari and the story is all too familiar. Nigeria’s GDP Growth rate for 1983, 1984 was -10.92% and -1.12% respectively. Annual inflation rate in the same period was 17.2% and 23.8% respectively.

Buharinomics is synonymous with Stagflation.

How did we get here?

While it all started from the drop in oil prices in 2014, a cocktail of economic policies from the Buhari-led administration is largely blamed for Nigeria’s economic quagmire. Since it came into power, the government has adopted economic policies that are centered around defending the local currency, import substitution and social spending.

For all its good intentions, these policies are pregnant with side effects that potentially erase its positives, turning into cancer of cataclysmic proportions.

For example, while the policy of defending the exchange rate stabilized the naira between 2016 and 2019, it cost the CBN trillions in interest payments and high cost of borrowing.

The high cost of borrowing is associated with higher inflation and stunted economic growth as small businesses cannot secure the funding required to expand and even when they do it is expensive.

The policy of promoting locally made goods over their foreign alternatives has also led to multiple bans of access to forex to imports, higher customs duties and taxes on imports and a crushing border closure all of which have combined to send inflation off the roof.

Nigeria’s inflation rate conundrum can also be traced to supply-side challenges such as insecurity, logistic gridlocks, corruption and inefficiencies at the Nations ports and an overall bitter experience in the nation’s ease of doing business.

How to get out of Stagflation

There is no clear-cut set of rules that can end stagflation however a rethink of the government’s approach to policymaking and implementation could be a good first step to control it, especially if the target is one of the major causes of stagflation, supply-side inflation.

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To address Nigeria’s challenges with Stagflation, the Buhari Government will have to swallow its pride and relinquish trust in moribund policies that have not worked. Wholesome of Nigeria’s economic challenges are out of its control (like fall in oil prices) a huge chunk of it is self-inflicted and as such within its control. For example, it must fix the spate of insecurity around the country by being more deliberate with dealing with bandits, militant herdsmen and terrorists.


It must declare a national emergency in the nation’s ports and reduce the lead time to clearing goods for import or export. It must address the logistics issues affecting the distribution of farm produce from a place of planting to the destination of consumption.

Monetary policy restrictions stifling trade must be loosened and replaced with a reward policy system that encourages exports as against imports without banning cheap substitutes that have no local production advantage. We need new regulations and laws that favour private sector investments, protect property and enable capital formation. A case in point is the perennial PIB Bill that gets debated year after year.

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These are not novel ideas within economic circles and as such cannot be that difficult to conceive and concede to doing. The challenges have always been the will and courage to act in defiance of snags such as vested interests, political ideology, endemic bureaucracy, and corruption. This government has shown in the past that it can roll back on unpopular policies except that it does it too late with not enough time to create a positive impact.

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