Aliko Dangote, may be expanding his empire into car assembly, if the Central Bank of Nigeria (CBN) gives the Asset Management Company of Nigeria (AMCON) approval. Dangote had put in a joint bid with the Bank of Industry (BOI), with the Kaduna and Kebbi state governments for the PAN assembly plant. The move to purchase the plant is a master stroke by the billionaire for several reasons.
His collaboration with the state governments means he will not face opposition from the state governments if the bid is successful. Instances have occurred where a state government slammed charges on those who purchased federal assets. Patronage from the state government is also guaranteed since they are shareholders.
The potential acquisition also keys into the Buy Nigeria initiative being promoted by the federal government. Among the executive orders signed by Acting President is support of local content in public procurement by the federal government. Prior to its struggles, the federal government had been one of PAN’s biggest customers.
Even though vehicle assembly is capital intensive, raising the money required will not be an issue, as companies under the Dangote group have a turnover running into billions of naira annually. The Bank of Industry also has the required financial capacity. The Central Bank of Nigeria (CBN) in its foreign exchange intervention, has shown a preference for manufacturers, so access to any needed foreign exchange.
Aliko seems to have had either incredible foresight or perhaps this was a grand plan. In 2005, the Dangote group bought the Oshogbo steel rolling mill from the federal government. In the past two years, the Dangote group has steadily moved into core manufacturing. The group earlier this year, had begun moves to go into tyre manufacturing. In April, the group in conjunction with Sinotruck, a Chinese company had begun a joint venture with a Chinese company to manufacture trucks.
Reviving the assembly plant also has positive implications for the Northern region. The plant will hire thousands of workers, thus reducing unemployment in the North east. Tax and other revenues that will be paid by the company, will go a long way in boosting the internally generated revenue of Kaduna state. Even though not affected by Boko Haram, investors have generally stayed away from the North due to the negative headlines the unrest creates. Competitors such as Innoson, Kia and the Vaswani brothers, may be in for a tough time as Dangote is fond of selling goods at the slimmest of margins, in favour of quick turnover and revenue from after sales services.