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Corporate Stories

Corporate Stories: The back story behind the UBA & STB Merger



Tony Elumelu

In this month’s episode, we tell the story of how one of the biggest deals in Nigeria’s corporate history was executed with the heart of a lion. It’s a story of sheer guts, desire, deception, fraud, crony capitalism, rise and fall, tact, brilliance and most of all, ambition.

The Beginning of the end

It was late into the night on March 4th, 2004 as directors of United Bank of Africa (UBA) deliberated on one of the toughest decisions they had ever faced. Just two years earlier, the bank had been forced into a similar position, only that then it was not as punitive as this one. This time, they were grappling with a Central Bank of Nigeria (CBN) directive to split the post of CEO from that of the Chairman.


This CBN directive was like a knife struck at the heart. The business whiz kid and majority shareholder of the bank, Hakeem Bello Osagie (HBO), had been asked by the CBN to resign within 24 hours. Thus, a decision had to be taken that night. As the board deliberated late into the night in a bid to address the predicament, it became clear that there was no way out.

The reign of Hakeem Bello Osagie as one of Nigeria’s most enigmatic banking Chiefs, had come to an abrupt end. For the Nigerian banking sector which watched in amazement at how this young man rose to become a symbol of the new era of Nigerian banking, the news of HBO’s fall from grace still ranks as one of the shocking moments in the sector, which at the time was entering an uncertain future. But as the saying goes, when one door closes, another opens in the never-ending chapters of history.

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Flash back – Era of predatory banking

It was the early 1990s and the government of Ibrahim Badamasi Babangida (IBB), former dictator and Military President of Nigeria, had just decided to liberalize the banking sector. As part of the Structural Adjustment Programme (SAP)-induced economic reforms, his administration oversaw the issuance of a flurry of banking licenses that resulted in Nigeria’s financial sector becoming awash with the so called “new generation banks”. The banks were new and stylish. They promised depositors heaven and echoed the never-ending slogan that Nigeria was open for business.

Their promise of a new Nigeria was aptly depicted in the bout of captivating advertorials that flooded local TV channels in the 90’s. One of such adverts was one with a synopsis that displayed Nigeria in all its natural beauty. It opened with a water fall scene and quickly moved on to a young man playing a flute and then to a cock crowing. It then quickly moved to a group of young men beating drums elegantly and then to women pounding away ahead of their dinner. A young man harvesting cocoa will follow quickly shifting to another drinking fura de nunu. As viewers watched in awe the display of the cultural diversity of Nigeria and its rich agricultural heritage, a serenading voice slides in welcoming its viewers to Nigeria. The voice was remarkably in a foreign accent, which conveyed the suggestion that Nigeria was open to foreigners for business. As your curiosity increases at the spectacle on TV the voice announces succinctly: “when you are thinking of foreign investment, the natural place to come is Nigeria and the bank to reach is Crystal Bank, where we make banking a real pleasure.” As the ad comes to an end, you are reminded quite confidently: “Crystal Bank, where to bank in Nigeria”.

Crystal Bank was one of the hundreds of banks that operated in the early nineties under the government of IBB. The founder of the bank, Chief Zebulon Abule was rumoured to have setup the bank to remain relevant in the politics of the early 1990s. In the 90’s politicians desperate for power had to keep themselves busy as former military leader, Ibrahim Babangida kept dithering on the transfer of power to a democratically elected President.

According to rumours at the time, Crystal Bank funded the Cement importation business of the founder, and gave him loans under unfavourable terms, which really is was not a unique case. The banking sector was thus laden with poor corporate governance. After the deregulation of the banking sector by IBB, the number of commercial and merchant banks went from 40 in 1985 to 115 in 1995. The banking industry also diversified into specialized banking services, giving rise to primary mortgage institutions, which as at 1995 were 280 in number. Community banks numbered up to 1355 in 1995.

The sheer number of financial institutions made it difficult for regulators to keep up with the new generation banks, as they were called. By 1994, 48 out of the 120 commercial banks were distressed while 7 were on the fringe of distress. Twelve were reported to be outright illiquid or technically insolvent. Only 72 banks representing 60% of the total were liquid and adequately capitalized.

It was a disaster of unimaginable proportions waiting to happen. Depositors lost billions of Naira in deposits and prisons were littered with ex bank chiefs who stood accused of fraud and financial misappropriation under the government of an unforgiving military junta, General Mohammed Abacha.


The Nigerian Deposit Insurance Corporation, NDIC which was setup about 7 years earlier (1988) under the recommendation of then-CBN Governor, Ola Vincent, was faced with its worst nightmare.

In one example of bank failures, 2 high profile banks, Alpha Merchant bank and the United Commercial Bank were declared distressed. Over N1.8 billion belonging to Alpha Merchant Bank depositors was lost, including government agencies which lost about N1.2 billion. United Commercial Bank owed the CBN over N903 million in loans and advances as at the time it collapsed. Included in the list of banks that the CBN could salvage from distress was African Continental Bank (ACB) and Crystal Bank.

As the wave of banking sector crisis swept through the country, a door was seemingly opening for a new crop of banking whiz kids that would change the face of Nigerian banking forever. In February 1995, a young 32-year-old man named Anthony ‘Tony’ Onyemaechi Elumelu (TOE), who was an Executive Director at Linkage Assurance Company Ltd had had enough. Tony Elumelu informed his Chairman, Ebitimi Banigo that it was time to pursue a solo career.

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TOE as he will later be called by friends and associates had served Chief Banigo for over 6 years in All States Trust Bank in capacities such as Branch Manager and Regional Manager in Port Harcourt. According to some rumours, he had his first fall out with Chief Banigo, after stories emanated that he made millions in a forex deal. TOE was subsequently withdrawn from All States Trust Bank and sent to Linkage Assurance as Executive Director. Linkage Assurance was the insurance arm of the renowned Conglomerate, chaired by the onetime banking mogul, Ebitimi Banigo.

Undeterred, TOE continued to serve his boss, bidding his time as he watched events unfold in the banking sector, which was reeling in losses.

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TOE in tune with his middle name, “Onyemaechi” (which roughly translates to “who knows tomorrow”) already knew that Nigeria was on the cusp of a banking revolution. He called his friend, Albert Okumagba and Chuka Onwuchekwa, informing them that he wanted to setup a new company.

The birth of “a Standard Trust Bank”

Albert and TOE had struck a unique relationship back in 1987 when they were studying for their master’s degree in the University of Lagos. Their relationship blossomed over the years, with Albert going on to become TOEs best man at his wedding in 1994. TOE returned the kindness a year later.

TOE informed Albert and Chuka that their new company will be named Banc Garanti Limited (BGL). The plan was to use BGL as a vehicle to achieve their goal of conquering the financial sector. To setup BGL he raised seed capital by pooling funds from family and friends. According to close associates, TOE called these friends “intellectual friends”, suggesting that he pitched to those who he thought had knowledge of the sector and thus could easily be persuaded to invest in a new enterprise.

Leveraging on their experience and tenacity, BGL also started making money by helping technically insolvent banks to facilitate mergers and acquisitions. TOE soon led the team to acquire a distressed bank named Merchant Bank of Commerce (MBCOM), which they later renamed to Continental Trust Bank.

MBCOM as it was called upon acquisition, had Ike Nwabuoku as its Managing Director, with TOE as an executive director. As ED of MBCOM, TOE leveraged on his experience and unique insights into the insolvency of most banks, deciding it was time to acquire a distressed commercial bank. They had their sights set on African Continental Bank (ACB), Pinnacle Bank, Commercial Bank of Africa and Crystal Bank.

According to an official account, TOE articulated and wrote a memo to the CBN, applying to takeover Crystal Bank. As the CBN dithered for weeks on TOE’s proposal, he wondered what other levers he could pull to push through this request.

Most people who knew TOE opine he had a knack for intensely following through with projects that are directly under his purview. Failure was hardly an option even if it meant using unorthodox means. As it became clear that the back and forth between the CBN and the Ministry of Finance could jeopardize his vision, he moved on to plan B.

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TOE approached one of his non-executive directors at MBCOM, a certain Brigadier General Abba Kyari to help use his connections in the Ministry and the CBN to secure the approval of his proposal. This after all, was why you had men of this stature on your board.

The General, who was friends with Mr. Tony Ani, the Minister of Finance at the time also had connections at the CBN. He soon got feedback from top officials at the CBN that TOE’s request was being viewed favorably. But that was not enough. TOE kept pushing.

As the deadline day to submit bids drew nearer, they flew to Abuja to continue lobbying, shuttling between the CBN and the Ministry of Finance to secure the numerous approvals that had to be obtained. In hindsight, TOE was doing the CBN, and to a large extent the depositors at the beleaguered banks, a favour.  But this is government. You would have to sweat your way to achieve any goal even if it means paying government officials for doing what should be their jobs.

It was now 30 minutes before deadline and they were yet to secure CBN’s approval. TOE’s heartbeat raced as government bureaucracy stood between his future and failure.

Through the help of the General, the Ministry requested for a N100,000 non- refundable bid deposit for the bank, which TOE promptly paid. To fund this transaction, they secured the approval of the board at MBCOM. By the time they were done, it was too late to get a written approval. And so, they left Abuja with a “verbal approval” for the deal.

TOE had scored a major victory. As celebrations ensued in Lagos, TOE’s attention turned towards the task ahead. They had to raise the purchase consideration. According to historical accounts of the transaction, MBCOM led the acquisition of the bank by injecting over N500 million into the bank. In the wake of the crisis, the CBN had increased the minimum share capital for commercial banks to N500 million.

The new owners of Crystal Bank went a step further. They increased their share capital to N750m. MBCOM setup an SPV named Merchant Bank Ventures which in turn owned about 85% of the new bank.

In tune with keeping everything in house, BGL was also appointed the lead arranger of the deal, pocketing lucrative fees for the now leading investment and fund-raising house in the financial sector.

An unofficial account of this transaction suggests that TOE had approached some of the largest depositors at the then Crystal Bank. He made them an offer they couldn’t refuse. TOE, it was alleged, told them that he was planning to take over the bank and needed their support. He told them he wanted to assure them that their deposits were secured but that he needed one favour – that they should convert their deposits into shares and become shareholders in the new bank.

It did not end there.

He also informed them that he needed them to match their deposits with even more investment in the new bank. In return, he promised to make them even richer and solidify their stand as billionaires. One of the alleged ‘major depositors’ was a certain Rasheed Ladoja.

The depositors, bemused at the brazenness of this 34-year-old banker, realized that they had no choice. This was an offer they could not refuse. A few weeks later, MBCOM announced the constitution of a new board of directors of a newly created bank, Standard Trust Bank. The name was crafted by none other than TOE himself. Crystal Bank was dead and buried and Standard Trust Bank was birthed.

On the board of the new bank were, Senator Rasheed Ladoja, Chief Annie Okonkwo, Alhaji Yusuf Ali, Chief Ferdinand Alabrabra, Ike Nwabuoku, Abba Kyari as Chairman and TOE as Managing Director. Thus began a new era that would oversee the transformation in Nigerian banking, with Tony O Elumelu as one of its leaders.

The announcement of the takeover of the defunct Crystal Bank (now Standard Trust Bank) took everyone by storm. Understandably, critics and admirers of TOE wondered how he pulled off this feat considering his relatively humble background. Just as his rise brought him stardom, critics went on a prowl.

The Making of a Lion

Rumors persisted about how he went from a Branch Manager in All States Trust Bank to become the owner of commercial bank. The rumored ruse between him and Banigo spread among critics and supporters alike, until Chief Banigo laid the matter to rest. A Harvard Undergraduate of Economics, Chief Banigo came into Nigerian banking with a wealth of experience. Before returning to Nigeria, Chief Banigo had worked in Citibank, New York; Citicorp International Bank and Chase Manhattan Bank. Upon returning to Nigeria he was made Managing Director of International Merchant Bank of Nigeria, one of the most iconic banks of the 80’s.

In IMB, he supervised a legion of banking executives that would proceed to dominate the banking sector in Nigeria for decades. Despite his failings, Chief Banigo, is today viewed by many as the “Godfather” of modern day banking in Nigeria. TOE learnt from him early on that the nascent financial services sector, just like politics, was all about permanent interest and keeping relationships cordial. Thus, being in good stead with a personality like Banigo was critical to achieving his goal of acquiring a commercial bank. Chief Banigo will in 1995 personally pen TOE a letter of appreciation and commendation, wishing him well on his next venture. Associates of TOE maintain till today, that he carries this letter in his briefcase wherever he goes. Loyalty was sacrosanct for TOE.

Unlike today, the banking sector TOE came to be a part of was a much different place in the 90’s. This was a period when banks where still reeling from a crisis and deployed risk management techniques that favoured a measured approach to mobilizing customer deposits.

The Nigerian banking space was divided into two main categories. The old generation and newer generation banks. While the former relied on their proven service delivery, reliability and trust to attract deposits, the new generation banks relied on aggressive marketing schemes that often depended on perception, coercion and relationships to attract deposits. Seeing that trust was a major factor in attracting deposits from depositors who had been previously scourged and who lost confidence in the banking sector, the word “Trust” became a nomenclature for deriving names of newer generation commercial banks. But TOE also had a different approach to banking that heralded his unorthodox ways.

Just as banks were consolidating their market share in key commercial nerve centers in the country such as Lagos, Port Harcourt, Aba, Onitsha, Kano, TOE followed a more precarious route. He decided his bank was going to open branches in every state capital in the country and other locations that had business opportunities. In fact, by October 1997, just a few months after he took over Crystal Bank, STB had opened a branch in Abuja. The move, unorthodox at the time, was chided by critics who wondered how a new bank with a modest balance sheet could operate branches in locations that lacked commercial benefits. For TOE, this was all part of a grand plan.

STB also ushered in an era of bold and aggressive marketing in commercial banking. TOE, according to some sources, favoured an aggressive approach towards growing the bank’s deposits and often led the way in doing this himself. In one account, he gathered a stack of complimentary cards collected from the numerous people he had met at airports, hotels, and the lobby of government offices. A message was written on each card and transmitted to the STB branch manager in the location nearest to the office address of the contact.

Branch managers who received this card knew immediately that they had a target to acquire this contact as an account. TOE would often call the branch head asking if the customer had successfully opened account. A negative response often attracted severe consequences. Another account revealed that TOE will often lay siege in the banking halls in the evenings as he awaited marketers who were returning from the deposit drives. As you enter the banking hall you were asked “how many accounts did you open?” Remarks like: “look at this guy, he came back empty handed” was not uncommon and was difficult to stomach by some of the marketers. For those who got positive remarks, their targets were subsequently increased. Opening of new accounts was very competitive among employees, a competition that often required extreme means to win.

As the competition rose within the bank, so did it with other banks. New Generation banks alike deployed even more aggressive tactics towards deposit drives. The new generation banks introduced several initiatives that was geared at extracting deposits from unsuspecting depositors who felt safer stashing their cash in older generation banks or in their homes.

The approach was two pronged: First was to relax some of the bureaucratic operating procedures in order to make their services faster and much better than the sloppy services that was pervasive with older generation banks. The banks also introduced higher interest rates to customers in exchange for deposits and treated their loyal customers like Kings.

The second approach was to offer more flexible management styles and improvement of the working condition of their employees. Staff of newer generation banks earned twice as much as their peers in older generation banks and were barred from joining the labour unions. As the rewards towered in comparison to older generation banks, it conversely paled in comparison for job security. Also, these banks quickly deployed and perfected the use of women marketers. They adopted the strategy of recruiting female graduates as marketers and unleashing them at unsuspecting men whom with little persuasion would open accounts. STB epitomized most of the characteristics of the New Generation Banks, and its deposits soared.

By deciding to open branches in every part of the country, TOE was strategically targeting public sector funds – an area of opportunity that his competitors had largely ignored. The strategy according to insiders was named “insurgent” banking and came at a significant cost. Branches reported losses and chasing deposits became even harder.

While some employees excelled against all odds, others who couldn’t stand the psychological turmoil bucked under the pressure. But TOE was unrelenting. He told his associates that soon, the branches would turn in profits. The move finally paid off in 1999 as democracy was ushered in. Under democracy, each tier of government was independent in terms of their administration and more importantly their finances. TOE knew the states would require funding to finance projects and was already strategically positioned to seize the opportunity. In return for granting loans to states, STB secured Irrevocable Standing Orders secured against the FAAC allocations of the states and their local governments. The 3 tiers of government also required the services of banks where they could deposit their allocations. STB was positioned to meet this need.

Furthermore, STB’s positioning gave it another incredible benefit. The CBN had included branch network as a criterion for being considered as a settlement bank. There were only 7 out of 89 banks appointed as settlement banks and ostensibly, STB was one of them.

The bet had paid off, or so it seemed.

TOE held countless retreats with his employees, where he often dished out kolanuts to help keep them awake late into the night. In one remarkable encounter, he sat and listened to his executives present an overview of the Nigerian economy. After beautifully presenting an overview and outlook of the economy for the ensuing year, the presenter projected a targeted profit of N600 million for the financial year. This was about three times the prior year’s profits. According to sources, TOE immediately stood up and left the hall in frustration. Within hours he returned with his own projections and gathered everyone back into the hall. He told participants that the bank would target a profit of N1 billion from the N600 million they had initially projected. By year 2000, the bank declared a profit of over N1.2 billion (from N221m), the first by any bank at the time.

Followers of the banking sector in this era still have divergent views of how banks came to declare record profits. Just as it is today, commercial banks made profits from lending at exorbitant interest rates, excessive fees and forex transactions. Nearly all banks were in on the game and soon the race for astronomical profits began.

As other banks jostled for branch expansion and paper profits, TOE set his eyes on an even bigger target; He had in a seminar in 1998 declared that banking consolidation would ensue in 5 years.

His next goal was to become a top-five bank.

When vision and opportunity come together

After the retreat, the conclusion at was that to become the number one bank in Nigeria, STB would have to acquire one of the older generation banks. Union Bank, First Bank and UBA were shortlisted as the likely targets. For some of the attendees of the retreat, the thought of acquiring a bigger bank was unimaginable and sounded like a dream.

TOE immediately set out to put his plans into motion by listing STB as a Publicly Quoted Company in 2003. By December of that year, the bank launched its Initial Public Offering (IPO). Standard Trust Bank offered about 1 billion units at N4 per share to the Public in an offer that was to close by January 2004.

In typical, TOE style he reportedly gave his comrades a target to raise the N4 billion, the total envisaged IPO purchase consideration. According to a different account, it was understood that he alone took on the challenge of selling 500 million units of the stock and then giving the staff another 500 million units to sell. TOE would personally raise the N4 billion while he expected his marketing team to raise a combined N2 billion.

The marker was laid down and in 2003, just when the jingle bells were ringing, Nigerians would come to witness an IPO like never before. STB marketers marketed the shares with the same vigour and tenacity as when they were driving for deposits. Immediate family members, relatives, friends and well-wishers, colleagues of spouses, church members and associations. No one was spared in this never-before-seen marketing of an IPO.

Road shows were organized across the length and breadth of the country with TOE traveling to about 17 locations to sell the IPO. By the time they were done, about 60,000 Nigerians had subscribed to the shares of STB by more than 2 folds.

The Standard Trust Bank IPO was oversubscribed by 154%, unprecedented at the time. Instead of raising N4 billion, the bank raised a whopping N8.4 billion. TOE had the cash he needed to fund any potential acquisition. And so, by the summer of 2004, the CBN Governor, Prof Charles Soludo, promising to change banking, jolted the banking sector in one of the most brazen regulatory pronouncements ever made in Nigeria.

He announced to Nigerian banks and the world that the CBN had increased the minimum capital base for banks to N25 billion. The banking sector, perplexed by this action, commenced intense lobbying to get this brazen policy reversed. TOE soon disappeared from the scene as he pondered on his next move.

Across the Island, where the older generation banks held sway, there was an air of confidence that they would make the N25 billion cut. It was inconceivable that a new generations bank would be capable of raising the required capital, let alone having more than enough capital to be able to swallow an older generation bank.

But as Hakeem Bello Osagie (HBO) – who had been ordered to resign from UBA – licked his wounds and pondered on his corporate future, he received a call from TOE. Just like in the acquisition of Crystal Bank, TOE made HBO an offer he couldn’t refuse. It was an offer to acquire an estimated 35% of his shares in UBA – a move that would put STB in a better position to acquire its bigger rival.

Flash Back 2004….The Game is over

On March 9, 2004, a newspaper headline read out boldly “UBA Loses N11.08 billion in Market Value”. This was just 5 days after the shocking resignation of the banking mogul, Hakeem Bello Osagie. The Central Bank’s instruction on March 2nd required that he resign from the board with immediate effect or it would dissolve the board unilaterally. The CBN also directed that the bank disengages its Vice-Chairman, Mallam Abba Kyari, and its Executive Director of Corporate Affairs, Mrs. Mairo Bashir. (Mallam Abba Kyari, who is the current Chief of Staff to President Buhari was once the Managing Director of UBA).

The CBN’s order was so stern that it did not give HBO and his board any room to wait till March 23rd to meet, to perhaps forestall any chance of them being able to appoint a successor that would do their bidding. Just like in African politics, choosing the right successor is one of the most important decisions a bank CEO or Owner would make.

Because UBA was yet to inform the Nigeria Stock Exchange of the resignation of its chairman, it faced another round of sanctions by the Exchange. The stock market had had enough already, and a sell-off ensued in no time. The bank’s share price plunged 28% from a 2004 high of N15.48 per share to N11.14 as at Friday, March 5, 2004.

Sh*t had hit the fan.

As a change of guard befell UBA, Nigeria’s 3rd largest bank at the time, another loomed at the CBN.

Enter the Professor

The CBN Governor, Joseph Sanusi’s term was ending and he promptly informed President Obasanjo of his intention not to seek another term. To take his place was an erudite 44-year-old Economics Professor who was a member of President Obasanjo’s economic team and the architect of the economic policy of the OBJ Administration – the National Economic Empowerment and Development Strategy (NEEDS).

On April 30th 2004 and in a huge departure from the norm, the government appointed Professor Charles Soludo as the new CBN Governor. This was the first time, Nigeria would have a CBN Governor who was not from the banking industry. While economists cheered, bankers welcomed him with cautious optimism. Soludo was someone they didn’t know quite well and couldn’t decipher. Soludo was young, confident and assertive and had in the previous year been blamed for making a comment that briefly crashed the naira. There was palpable fear that such a man could upend the status quo in the banking sector. Soon, Soludo would proof them right.

On Tuesday, July 6, 2004 Prof. Soludo announced N25 billion as the new capital base for Nigerian banks, up from N2 billion. He also fixed December 2005 as the deadline for banks to comply. The news sent shock waves round the banking industry, and left the newer generation banks seething. The Senate kicked against it and promptly summoned Soludo to explain what in the world he was thinking. The Nigerian Labour Congress and the Manufacturing Association of Nigeria complained that it would lead to another run on the banking industry.

As the country stood in shock and reacted in frenzy, TOE went into stealth mode. He would disappear from the scene in the last quarter of the year plotting how his bank, Standard Trust would survive its next big threat. Just as TOE had predicted years earlier, the banking industry faced a massive consolidation on a scale never to be imagined. To avoid being a target and getting caught up in the impending storm, they had to act fast. And so, TOE immediately changed the strategic direction and ideology of the bank.

The new STB would emerge in the form of a Lion, relying on size, efficiency and brutality to confront its future.

Fast forward – The art of deal making

Before that fateful call to HBO, TOE had watched proceedings in UBA over the last few months. Like a patient lioness waiting to pounce on a wounded prey, he quickly realized that of the 3 biggest banks, UBA was most vulnerable.

As the situation in the bank deteriorated, coupled with the rising tensions following the N25 billion capitalization deadline, negotiations with HBO stepped up in the background. Sources reveal that he set up committees to run the day-to-day operations of the bank while he disappeared from the scene for 3 months.

By January 2005 he reappeared, calling a meeting of all staff from manager levels and above. It was to break the news that their bank, STB, was going to acquire/merge with UBA Plc, Nigeria’s 3rd largest bank.

Those present at the meeting were stunned in disbelief. No one fathomed that this audacious acquisition was indeed in the offing. STB had the balance sheet to meet the CBN’s deadline but the goal of acquiring a bigger bank was daunting.

Just months before, STB had acquired Continental Trust Bank, a relatively smaller bank and a testing ground for what was to come.

After breaking the news to employees, on July 18, 2005, UBA/STB would announce to the world of their plan to merge into “one big bank”.

As the banking industry pondered the implication of what had just happened, TOE informed some selected VIPs personally of what happened.

This was another page from his playbook.

To understand how TOE operates, the book, 48 laws of Power is a perfect guide.

The first law, “Never outshine the master” was a particularly stark attribute. Always make those above you feel comfortably superior. That night, he picked up the phone and dialed all the people he knew who could influence the deal, either positively or negatively.

It was psychologically important that they hear from him directly before reading it on the pages of the newspaper the next day.

Law 43: “Work on the hearts and minds of others” was at play. Soon after the announcement, TOE formed several sub committees tasked with seeing through the deal. A month later, February 4th to be precise, the STB team arrived UBA to commence negotiations on what would be the largest merger in Nigeria’s banking history.

The financial sector had never witnessed a merger of this proportion and scale and so UBA had to hire McKinsey to help midwife the merger. Sources suggest that McKinsey had a playbook for mergers like this and set out to implement it.

Soon, bureaucracy would get in the way. As negotiations slowed and tasks piled up, TOE became increasingly frustrated. According to sources, his unorthodox ways manifested during this period.

TOE was renowned for moving around with a small team of loyal insiders who implemented some of his more pertinent targets. The team of loyal insiders were referred to as “Marines” by staff, some of whom dreaded their rising influence. These guys rose to prominence in the early days of branch expansions, moving in at the behest of TOE to deliver when it seemed like project timelines were not being met, risking cost escalations and embarrassments.

The Marines hardly failed to deliver.

They over the years built a fearsome reputation as TOE’s henchmen. And so once again, they would become handy in the toughest task yet.

At some point, committee members for the merger risked being rendered irrelevant, especially if they failed to deliver on crucial tasks. The Marines would move in and step up activities. Sometimes, to deliver on tough tasks, use a small team that is focused and nimble. Their age, experience and levels are irrelevant. The only thing that matter is their tenacity and ability to execute on orders.

Challenges sprung from all angles. TOE, against popular reasoning, had insisted that the merger would not result in loss of jobs. This was a key aspect of the merger and one narrative he wanted to be associated with the merger. The optics always mattered to TOE.

Merging an old and new generation bank was tough to execute considering the many psychological, administrative and financial implications. Mergers are expected to produce synergies but many don’t realize the non-financial cost associated with achieving this daunting task.

There were a lot of challenges that lay in the execution. For example, the employees at UBA earned about half as much as those in STB. A Manager in UBA earned less than an Assistant Manager in STB. This was a morale and psychological hurdle to deal with. How would they compensate the Manager in the Old UBA without blowing the budget? How would they slash the salaries of the Assistant Managers in STB without hurting morale? It all seemed like a zero-sum game which was frankly not an option.

TOE and his team decided on an action plan. They would promote the Assistant Managers in STB to full Managers while they retained their salary levels. The Managers in the old UBA remained managers but would have their pay increased.

It seemed like a fair deal. Being who we are, insatiable homosapiens, some STB employees saw this as a huge opportunity. They had to cash in. Now a Manager in the new UBA but without a pay rise, the STB employee would have to figure out a way to cash in on this upgrade. To meet this goal, the insatiable few would approach other banks for possible hiring. Being a staff of STB had inherent financial value. For example, a newly promoted Manager in the new UBA who did not get a pay rise would take a job in another bank as a Manager but with a pay rise. The money they could not get in STB, they got in another bank. In their quest to boost staff morale by introducing pay equality, STB started losing key employees.

You can’t please everyone in life. There was even a much larger problem for TOE: The merger also meant some management level staff had to be exited or managed. In one prominent case, the position of Chief Risk Officer for UBA gave TOE his biggest challenge. Up there was a promising top executive by the name, Sanusi Lamido Sanusi (SLS). One of the sharpest minds at the bank. From STB was another up and coming star and a member of TOE’s inner circle, Victor Osadolor, the ED of risk at the bank.

SLS, though a Chief Risk Officer was well connected and had lineage linked to the Emirates in the northern city of Kano. TOE, one not to keep foes went at length to appease everyone. No raw deals for sensitive people that could be a problem in future

Everyone was important, no matter how small, talk less of someone with links to the high echelons of elite northern Nigeria.

SLS would not report to Victor Osadolor and vice versa.

As a student of Machiavellian principles, TOE knew he had to manage this deftly. Amid the storm that was raging in UBA, other banks also saw an opportunity. While they had missed out on the acquisition, they would not miss out on potential significant hires.  TOE still had a decision to make. Fortune, they say often favours the brave; people like TOE always had a break when none seemed possible.

SLS would later be poached by the rival First Bank Plc in September 2005. 3 years later, on August 2008, First Bank announced SLS would be the MD/CEO of First Bank when its MD/CEO Jacobs Moyo Ajekigbe retired on December 31, 2008. Six months after assuming the CEO post at First Bank, he was announced as the Governor of the Central Bank of Nigeria.

Another bone of contention in the STB/UBA merger was the name of the new bank. TOE’s inner circle preferred to retain the name STB, but TOE had a broader view of the deal and knew optics mattered. STB was in the driving seat but the name “United Bank for Africa” aligned with his vision to be the number one bank in Africa. And so, to remember their heritage, they would put beside the UBA name, a logo of STB. On August 1, 2005, Tony Onyemaechi Elumelu assumed the position of MD/CEO United Bank for Africa.

The merger was concluded and STB ceased to exist. The merger required that two ordinary shares of STB be exchanged for one ordinary share of UBA. The old UBA guard would have about 8 of their directors either resign or retire, including the Managing Director, Aliyu Dikko.

STB on the other hand had about 7 appointed to the board of the new UBA, signifying who was on the driving seat. By 2006, UBA had a total board of directors of 14 members with TOE as MD/CEO and Kayode Sofola as Chairman. The merger also created a behemoth of 380 new branches, the largest in West Africa. UBA and STB’s 5 million and 2 million depositors respectively also made them a formidable force in Nigeria’s retail banking space. STB had exchanged 4 billion of its shares for 2 billion of shares in UBA at a value of N10 per share, bringing the purchase consideration to about N20 billion. By September 2006, the first annual report of the merged bank, UBA’s balance sheet sized had risen from N332b to N1 trillion. The bank’s net assets also rose from N19.4 billion to N48.5 billion. Gross Earnings rose from N26 billion to N90.4 billion while profits rose from N4.9 billion to N11.5 billion. Earnings per share however dropped from 263 kobo to 187 kobo, the effect of an increase in shareholdings due to the merger.

Post-merger from the rear view

The deal between UBA/STB remains today as one of the most significant events in Nigeria’s corporate history. Critics might point to the fact that the merger has so far fallen short of some of its lofty expectations such as being the number one bank in Nigeria and Africa.

Rather than being number 1, ten years after this landmark merger, it remains the 3rd largest bank in Nigeria in terms of balance sheet size. In terms of market capitalization, it is also the 3rd at about N340 billion.

The merger was by and large a success. But perhaps, the most valuable thing about this merger was the lessons learnt for generations to come.

In a country where opportunities are rare for those from humble backgrounds, if you dare to dream, you will succeed. With determination, tenacity, focus and ambition, anything is possible.

Materials for this story was obtained from annual reports, press releases, information memorandum, NSE filings, company websites and other publicly available information. This is a Nairametrics creation.

Reprint, curation, adaptation or re-posting this story without the consent or approval of Nairametrics will be viewed as plagiarism.



Ugo Obi-chukwu "Ugodre" is a chartered accountant with over 16 years experience in financial management, corporate finance and financial analysis. He is also a retail investor and a personal finance advocate with over a decade experience investing in the Nigerian stock market. Ugo is the founder/Publisher of Nairametrics and blogs regularly on the website.



  1. Fifi

    March 15, 2018 at 6:59 am

    Wow! Interesting read.

  2. Dayo Atilola

    April 13, 2018 at 10:15 pm

    He isn’t called Egghead for nothing

  3. Nkiru Mordi

    April 18, 2018 at 6:29 am

    What a read!

  4. adetiloyeadedayo

    July 25, 2018 at 9:17 pm

    Great Article here,
    Tony Elumelu has done so much.

  5. Anonymous

    August 10, 2018 at 9:45 am

    This article is superb!!!! thank you very much! i am very grateful.

  6. Ipadeola Jonathan Okesooto

    January 9, 2019 at 1:46 am

    A great lesson

  7. mos

    February 8, 2019 at 1:06 pm

    nairametrics, great analysis. great documentary!

  8. chibuike dunstan

    April 18, 2019 at 10:46 pm

    Hmmm.., what a narration! other industries should learn from this more especially the insurance industry.
    having very rich family members and friends that believes in your ability was the key factor… these days everyone wants you to owe them so that tomorrow they come and claim all you have ever labored for… once again a nice write up

  9. Raheem Ishola

    April 25, 2019 at 10:12 am

    I read this article back then on twitter, now I’m here to read it again. There’s always a gem to take home from every read. This is a classic piece!!!!! No guts, no glory!

  10. Ose

    August 26, 2019 at 2:21 pm

    Quite revealing. Great write!

  11. Tunde Olaifa

    October 2, 2019 at 11:17 pm

    Good Read. Tony Elumelu is a legend

  12. Willodean Tisdale

    December 9, 2019 at 11:50 am

    Thank you for sharing this valuable info with us. As a practicing writer, I can say that I was hoping to include
    some facts and sparking ideas in my writing training intuitively.
    I believe it is imperative to spice your writing in the event you wish to catch
    the viewers’ attention. However, you did great, thanks

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Corporate Stories

Corporate Story: Intriguing tale of Seven-Up’s ugly fight for market share in Nigeria

For many years, competition in the Nigerian soft drink market was mainly between Coca-Cola and Seven-Up but in 2014, Rite Food came and disrupted the space.



Corporate Story: Intriguing tale of Seven-Up’s ugly fight for market share in Nigeria

It was early morning on Wednesday, November 13th 2019, and Ziad Maalouf was not asleep. He could not sleep, not with his mind burdened by what had become a serious problem facing Seven-Up Bottling Company, which he oversees. It was part of his job as the Managing Director to figure out a solution to this challenge. And that was exactly what he was doing as he sat in his study that early morning, typing furiously on his computer.

By 4:37 am that morning, Maalouf had sent out an internal memo and copied 25 top executives of the soft drink manufacturing company. In the memo, he made it clear that he was ready to declare war against the company’s competitors. He would not rest until the war was over and Seven-Up had emerged victorious, he declared.

Corporate Story: Intriguing tale of Seven-Up’s ugly fight for market share in Nigeria

Seven-Up Factory

But the internal memo leaked

Interestingly, when Maalouf sent out that internal memo, little did he know that a copy of it would leak on the internet and that it would be read by millions of people around the country. He probably trusted that every one of those he sent the memo to would take his concerns seriously and work assiduously towards solving the problem that had been identified. But that was not quite the case.

The threatening tone of the memo was probably the main reason why it leaked. Maalouf had been too passionate, talking about declaring war against his competitors and squashing them once and for all. As a business executive whose market share was being threatened by the activities of competitors, the Lebanese expatriate felt his passion was justified. Little wonder, he went nearly as far as of calling out some of his colleagues for not being passionate enough. So, possibilities abound that one of those colleagues had secretly leaked the memo just to spite the boss.

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[READ MORE: Analysis: Nigerian Breweries, the glory days are gone)

A sensational story

As expected, the press had a field day with this development and you can’t even blame them. The content of the memo made for the kind of sensational stories that every tabloid journalist thrives on. Consequently, many blogs and a couple of the mainstream media carried the story. But despite media coverage and the social media backlash that heralded the leaked memo, Seven-Up Bottling Co. never issued a rebuttal.

In the meantime, the competition continued…

How Rite Foods came to drag market share with Seven-Up and Coca-Cola

For many years, competition in the Nigerian soft drink market was mainly between Coca-Cola Hellenic Bottling Company and Seven-Up Bottling Co. The former produces and distributes Coca-Cola products in Nigeria, while the latter is licensed to produce and distribute Pepsi and other soft drink brands. But in 2014, Rite Food Nigeria Limited came and disrupted the space.

The story about how Rite Foods ventured into the Nigerian soft drinks market in 2014 is just as fascinating as the story of how it emerged on the Nigerian FMCG space in 2008. Its parent company, Ess-Ay Holdings Limited, had nothing to do with food production until the late 2000s. The company’s founder (Sulaiman Adebola Adegunwa) had until this time achieved his initial fame and fortune in the photography industry.

The digital revolution in the photography industry had prompted Adegunwa’s decision to diversify. But instead of just choosing a business model related to what he had already been doing for years, he chose to bet on the food industry. Needless to say that his gamble worked. His line of sausage roll became an option for consumers who had only known Gala sausage roll, manufactured by UAC Foods. Thanks to Rite Foods’ ability to endear the sausage roll to millions of Nigerians over a rather short period of time, the product soon became a market mover, thereby positioning the company as a major player in the market space.


Meanwhile, being the astute businessman that he is, Adegunwa kept on strategizing with his team on how to further consolidate on Rite Foods’ new-found success. Soon, they decided on a product that capitalised on the fact that Nigerians love to combine their sausage rolls with soft drinks.

By the way, this delicious combination of sausage roll and soft drinks has been happening for many years. Hardly does a Nigerian buy “Gala” without getting a chilled drink to “wash it down.” So, with this being the case, Adegunwa and his team realised that it could also venture into soft drink manufacturing. After all, if they were able to venture into sausage roll making and succeed, they could indeed make it in the soft drinks industry.

And that is exactly what Rite Foods did. It built a larger factory in Ogun State, assembled the needed skilled labour (many of whom were poached from its current competitors), and then began production. Before long, the company’s Bigi soft drink brands were able to find a permanent place in the hearts of millions of Nigerians. This has been much to the displeasure of people like Ziad Maalouf.

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[READ ALSO: Despite intensive advertising, International Breweries reported lower revenue and a loss)

Corporate Story: Intriguing tale of Seven-Up’s ugly fight for market share in Nigeria

Rite Foods Factory

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Rite Food’s strategy

It’s important to note that breaking into the soft drink market wasn’t as easy for Rite Foods as it may have seemed. Recall that the market was already dominated by Coca-Cola and Seven-Up. Moreover, Nigerians were, at this point, already used to drinking either Pepsi or Coca-Cola, Mirinda or Fanta, as well as choosing between Sprite or 7-Up.

As such, Rite Foods knew it needed to be very strategic in its efforts to get Nigerians to start drinking another set of cola drinks which, in all honesty, are more or less imitations of what were already available in the market. If it had failed to strategize and implement properly, the company would have failed woefully. But then again, you can trust the Adegunwa effect, because the rest is history.

So, what was Rite Foods’ strategy you ask? Well, the company had to offer Nigerians one thing they can’t reject – a good deal. The deal came as two things wrapped in one, which are more quantity at really affordable cost prices.

The more-size-and-less-price approach worked 

Rite Foods’ wide-ranging soft drink brands quickly garnered acceptance among Nigerians. Everything from Bigi Cola, Bigi Apple, Bigi Tropical, Bigi Orange, to Bigi Bitter Lemon are sold for N100. Rite Foods has also successfully positioned itself as the one-stop brand for all carbonated drink flavours, all within a space of six years. Little wonder Seven-Up Bottling Co. is very disgruntled.

So, why is Seven-Up the only one complaining?

So far, Coca-Cola Hellenic Bottling Company has been very mature with the way it had been handling the competition created by Rite Foods’ Bigi soft drink brands. Coca-Cola was one of the first to reduce the prices of its products in order to align with the realities on ground. Of course, the company may not have liked the unnecessary competition. But it was losing customers and needed to do something to address that. What it did was to reduce prices and introduce some new product lines in order to have a better competitive advantage. The company also intensified its marketing and distribution strategies instead of going about complaining.

Seven-Up Bottling Company also had no choice but to reduce the prices of its products. This must have understandably been a very difficult decision to make. The company was already struggling to survive the stiff competition posed by Coca-Cola Hellenic, which it still faces. But, it had chosen to declare  “war” on just Rites Food for daring to offer more affordable drinks to Nigerians. Quite interesting!

Let’s get back to Maalouf’s leaked memo for a moment…

“Let me start by explaining the competitive playground once again. This season is not like any other, so the mindset of growing vs last year, achieving budget, business as usual cost management, WILL NOT WORK!!! The outcome of this season must write the future and destiny of the 3 major competitors, along with the future of B-Brand industry (Bigger pack and lower price concept) disruptions in Nigeria. 

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“One company will flourish. One company will diminish. One company will finish. B-Brand disruptive business model will either become a temptation for anyone who has a bit of money to start own brand in Nigeria, or it will be a curse that ensures no one takes such a decision again!!!”

Quoted above is an excerpt from the memo. As you can see, Maalouf’s strategy entails destroying Rite Foods and the success it has recorded in recent times. He also made it clear that there’s a need for Seven-Up Bottling Company to send a strong message to anyone who might be thinking of following in the footsteps of Rite Foods. Has he succeeded in accomplishing these?

Let’s be clear – Maalouf’s leaked memo never specified how Seven-Up Bottling Company intended to go about “diminishing” Rite Foods’ growing prominence. However, there have been reports that Rite Foods accused the company of threatening it’s security and existence. As a matter of fact, lawyers representing Rite Foods Limited recently filed a petition against Seven-Up Bottling Company and its MD, Ziad Maalouf. That goes to show that this has been treated as a pretty serious matter.

Corporate Story: Intriguing tale of Seven-Up’s ugly fight for market share in Nigeria

[READ FURTHER: LaCasera had an awkward Valentine’s Day moment with Gala, causing customers to react)

Nigerian Senate has attempted to broker peace

Last week, representatives of the “warring”  companies flew to Abuja upon invitation by the Senate Committee on Ethics, Privileges, and Public Relations. The lawmakers summoned them to the closed-door meeting for them to dialogue and possibly reach a peaceful resolution.

At the end of the closed-door meeting, the Chairman of the Senate Committee, Senator Patrick Akinyelure persuaded them to resolve their differences and compete as friends, for the good of the Nigerian economy. The committee also taxed both companies to go and deliberate on the proposed peaceful resolution measure. They are expected to report back to the Senate in two weeks’ time with their decisions.

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Corporate Stories

A bitter family feud has continued to hamper this company’s growth

Sometime in early 2012, a wealthy, sophisticated, and beautiful middle-aged Nigerian businesswoman walked into a Lagos courtroom to testify before a judge.



A bitter family feud has continued to hamper this company’s growth

Sometime in early 2012, a wealthy, sophisticated, and beautiful middle-aged Nigerian businesswoman walked into a Lagos courtroom to testify before a judge. She had just filed a lawsuit before the court in a desperate bid to salvage her late husband’s investments in the Tourist Company of Nigeria Plc (TCN). She was also understandably trying to secure her financial future and that of her children. Her husband had just died, and she suddenly found herself thrust in the position of the sole breadwinner of the family.

The woman is Mrs Maiden Ibru, the widow of renowned businessman and politician, Alex Ibru. During her testimony on that fateful day, she made some pretty shocking revelations, albeit with some dramatics.  She told everyone gathered in the courtroom that just as she was walking in, she supposedly saw the apparition of her late husband telling her to fight. So, fight she did, by spilling all the secrets about the company.

Tourist Company of Nigeria Plc

Mrs Maiden Ibru appearing in court to testify.

Apparently, all was not well with the Tourist Company of Nigeria Plc, a hospitality company that owns one of Nigeria’s oldest luxury hotels – the Federal Palace Hotel. Perhaps no one would have known about TCN’s woes if Mrs Ibru hadn’t instituted her lawsuit and subsequently given her bombshell testimony. However, the sad thing is the fact that though it’s been seven years since Maiden Ibru’s court appearance, all is not still well with the company.

Catch up on the intrigues of the family feud, the allegations of financial mismanagement, the legal battles, as well as how all these have impacted on the company’s performance.

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[READ MORE: This CEO is fighting to work for a company that doesn’t want him]

A history dating back to independence

Before Nigeria’s independence from Britain on October 1st, 1960, there were many foreign-owned companies in the country. Of the many, AG Leventis Group, was one of the biggest in the country at that time. The group had several subsidiaries operating in different sectors of the Nigerian economy and the wider West African region. One of these subsidiaries, Victoria Beach Hotel Limited, established and operated The Palace Hotel.

The hotel, with its 150 rooms, marked Nigeria’s introduction to luxury hoteling. Indeed, the investors that established it aimed to set the bar high for the Nigerian hospitality industry, and to a large extent, it can be said that this mission was accomplished. The Palace Hotel was a source of national pride and even served as the venue for Nigeria’s Independence Day celebration.

Tourist Company of Nigeria

Tourist Company of Nigeria

Government takeover of the hotel

In what can only be described as Nigeria’s earliest attempt to nationalise foreign-owned companies, the Tourist Company of Nigeria Limited was incorporated on April 10th, 1964 for the purpose of acquiring the Palace Hotel. At the time, TCN was wholly owned by the Federal Government of Nigeria. The acquisition process was successful, and the hotel was renamed The Federal Palace Hotel. Between 1964 and the 1970s, the Government operated and even expanded the company; with the construction of the Towers Hotel and Casino which has some 224 rooms.

How the Ibrus came into the picture

By 1992, exactly 28 years after Nigeria acquired the Federal Palace Hotel, Alex Ibru and his brothers (Goodie and Michael Ibru) sought to take ownership of TCN. The brothers successfully used their company, Ikeja Hotels Plc, to acquire TCN from the Federal Government, and by April 20th, 1994, the company was listed on the Nigerian Stock Exchange.


It should be noted that the Ibru family is one of Nigeria’s foremost business elite who tactically positioned themselves as the custodians of Nigeria’s economy following independence from Britain. The family has business interests in different sectors of the economy, including media. Maiden Ibru currently oversees one of Nigeria’s biggest dailies, The Guardian, which was established by her late husband in 1983.

TCN in need of help

As the years passed by, the glorious days of The Federal Palace Hotel also gradually passed away. The Nigerian hospitality industry was becoming more competitive, thanks to the emergence of other big players such as Eko Hotels and Suites. These new entrants were offering more luxury for more exclusive tastes; consequently, TCN struggled to compete.

To compete effectively, the company needed to upgrade its facilities and services. And to help actualise this, South Africa’s Sun International Limited came on board and took up a major stake in the company in 2010. The South African luxury hotel group also supposedly invested heavily towards the refurbishment and restructuring of TCN’s properties.

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Accusation of fraud and a well-publicised lawsuit

Between 2003 and 2009, the Tourist Company of Nigeria was struggling to keep afloat financially. Going by Maiden Ibru’s lawsuit, not only was the company broke, it was insolvent and incapable of carrying on as a going concern. The woman even alleged that the company was heavily indebted to the tune of N2 billion. She specifically accused TCN of owing Oma Investments Limited, a holding company through which her late husband owned indirect shares in the hospitality business. The words uttered by her during the highly-publicised litigation captured the extent of the financial troubles TCN was immersed in.

“Omamo Investments, between 2003 and 2009, lent to the Tourist Company $7.1m, N610m, N381m and N19m, which the company has been unable to repay.

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 “The respondent has failed beyond resuscitation, has insufficient assets to meet its liabilities, does not have the capacity to meet the conditions for which it was incorporated, and has suffered a total erosion of its capital base. The respondent is both cash-flow and balance-sheet insolvent, and has not been carrying on effectively, the business of hoteling and catering.”

She went further to accuse her late husband’s brothers of betraying her husband. According to Mrs Ibru, her late husband was particularly disappointed in Goodie Ibru who, at this point, was the Chairman of the Tourist Company of Nigeria. This is because Goodie and his fellow accomplices allegedly, “altered some of the company’s documents, diverted money and committed all sort of atrocities without the knowledge of my husband. I am a widow and I have children to take care of.”

Investors’ confidence in jeopardy

In August 2016, news reports filtered in about Sun International Limited’s decision to leave Nigeria. As the company acknowledged, the contentious and protracted dispute between the company’s major shareholders (which consisted mostly of the Ibru’s), “frustrated all attempts to develop and improve” the company.

Earlier in January that year, Nigeria’s Economic and Financial Crimes Commission (EFCC), had opened investigations into Sun International Limited’s investment in TCN. This situation supposedly affected the company’s fortunes, as it reported a 20% fall in diluted adjusted headline earnings per share (AHEPS) to 628 cents for the year to June.

Eventually, Sun International Limited closed shop and left the country, though checks by Nairametrics confirmed that it still owns a major stakeholding in TCN as at H1 2O19; maintaining its initial 49.3% shareholding.

A business at risk

To a large extent, Maiden Ibru emerged victorious in the fight for the Tourist Company of Nigeria Plc. Although the company was never liquidated as she had prayed the court, Goodie Ibru stepped down as the company’s Chairman. She also facilitated the placement of Goodie Ibru’s ouster as the Chairman of Ikeja Hotels Plc, even as Oma Investments Limited acquired majority stake in Ikeja Hotel. This development affords the woman a considerable control over TCN, seeing as Ikeja Hotels is equally a stakeholder in TCN.

[READ ALSO: Common Ways Of Defending A Takeover Of Your Company]

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A bitter family feud has continued to hamper this company’s growth

However, TCN is struggling

In H1 2019, the Tourist Company of Nigeria Plc recorded a loss after tax of N931.3 million, after earning total revenue of N1.6 billion. Earlier in full-year 2018, the company ran at a loss after tax of N1.3 billion, after previously recording a loss of N3.2 billion in 2017. The company is also currently facing possible delisting from the Nigerian Stock Exchange due to corporate governance lapses bordering on free float deficiency.

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Corporate Stories

Cement Wars: The battle for Cement dominance between Ibeto vs Dangote

A story of the battle for Cement dominance in Africa’s largest economy, Nigeria.



dangote ibeto

A story of the battle for Cement dominance in Africa’s largest economy, Nigeria. How one man surmounted rivals, both big and small, to become the undisputed King of African Cement and another battled with the guardians of the corridors of power.

On a cold afternoon in November 2005, Federal Government operatives, acting on orders from above, swooped down on a busy factory in the oil rich city of Port Harcourt. They were under instructions to seal off a warehouse whose operations had contravened a government policy – a policy that would later prove decisive in a brutal race for market share in an industry worth over N1 trillion.


At first, the closure appeared to be due to a mix-up between an agency of the Government and the owners of the warehouse. It was expected to be resolved in a matter of days by the billionaire Chairman of the company. Emissaries were dispatched to help resolve whatever misunderstanding may have led to the seemingly excessive act by the government.

As days turned into weeks and weeks into months, it dawned on the owners of the multi-billion-naira conglomerate, which was based in the South-Eastern part of Nigeria, that they were dealing with powers that stretched far beyond the red sands of the South East. Something had to be done to resolve this issue. At stake was not only the reputation of the company, but billions of naira in inventory that could erode all the wealth that had been built over the years.

Flashback – School boy

It was January 22, 1966 in the bustling suburb of Nnewi in Anambra state, South-Eastern Nigeria. Nigeria had just witnessed a deadly coup one week earlier, and the mood in the country was still tense. But for a certain household, a major decision had to be made. Cyril, the eldest son of the home, was having a chat with his father that would decide the fate of one of his siblings.

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Cyril and his younger brother, Louis, were getting ready to go back to school but had to deliver a message to their father from their uncle. As the discussion with their dad ensued, their kid brother, Cletus, packed his bags in preparation to join his elder brothers in school for the first time. At just 13 years of age, he had his eyes set on acquiring a secondary school education.

He had just gotten admission into Crusader Secondary School, Isingwu Amachala in Umuahia. Seeing his older brothers in their school uniforms and school bags always got him excited and he couldn’t believe that the day he had been waiting for was finally here. As his elder brother left, his father called him in to break the good news, or so he thought. His dad, a sturdy

Nnewi man, like most at the time, had a different approach to fatherhood.

Back then and perhaps till today, much was expected from sons, just as was the case for their fathers. Responsibility began at an early age and it started by understanding the language of trade – making money. One of the responsibilities of a father was to ensure that his child had a sound education, not just in academics but in learning how to trade. Cyril and Louis had already toed the path of academic education and that was sufficient for the family. Someone had to toe the path of apprenticeship.

And so, his father would tell the young Cletus that his destiny was not to start in the four walls of an educational institution, but in the four walls of his uncle’s workshop. His uncle was a mechanic named Sir Lawrence Amazu. Young Cletus protested, cried and even went on hunger strike, as he could not believe what his father had done to him. Unfortunately, his tears were futile. He soon found himself on his way to Onitsha to begin life as a motor spare parts trader.

Undeterred and hopeful, he arrived at his uncle’s workshop in his school uniform, earning himself the nickname “school boy”. His fellow apprentices laughed at the sight of him; it was unthinkable to them that a young man would even consider choosing the lazy path of academics over the lustrous and respected route of the spare parts trade. Thus, began a new chapter in the life of Cletus Madubugwu “Omekannaya” Ibeto.


War story

For Cletus Ibeto, the journey to success can be seen more as a case of divine providence, than a case of pure hard work. In one of his many close shaves with death, when the young Cletus was drafted to the Civil War as a batsman to a Biafran Army captain, he was sent to buy food by his superior. Upon returning, Cletus found that his fellow soldiers, including the Captain, had been killed in an ambush by enemies.

A few weeks after that encounter, he was again drafted to the battlefront to fight against the merciless and powerful Nigerian soldiers, alongside other brave Biafran soldiers. The sound of rapid gunfire and pounding mortar were not loud enough to drown the death cries of dying infantry men.

As Cletus, the soldier lay on the ground with a bullet lodged in his lungs, the choice between life and death became no longer his to decide. He would survive after spending several months in the hospital, with the mark of his bravery firmly lodged in his lungs. The fortuitous streak that marked his existence continued to be his weapon as he rolled into the next chapter of his life, post-Civil War.

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It was 1979 and the newly democratically-elected President of Nigeria, Alhaji Shehu Shagari, had just come into power on the back of an anti-corruption crusade. His government was liberal, so some of the hardline policies of the departed military government of Olusegun Obasanjo were abolished. One of the first decisions taken by the Shagari Government was to lift the restriction on imports and exports.

General Obasanjo introduced import licenses as a means of reducing reliance on foreign goods. The eradication of import licenses would be the next major streak of fortuity for Cletus. Not long after the Shagari administration relaxed the restriction on import licenses, it made a drastic U-turn. Oil prices were falling and government revenues had taken a huge dip. In an apparent haste to stem the tide and shore up revenues, the Shagari Government introduced import licenses again.

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The decision sent out a wave of confusion and uncertainty, causing importers to take a step back as they pondered what next to do. As most of them waited on the sidelines to comprehend the flip-flop, Cletus took advantage and pumped in N3 million to import spare parts into the country. After the Civil War, he had doubled down on his knowledge of the spare parts trade. His uncle and former mentor, Sir Lawrence Amazu, pivoted into trading spare parts.

Back then, Sir Amazu saw the opportunity to carve a niche for himself in a nascent economy that had just birthed its first set of homegrown middle-class workers. Many of them owned cars that needed servicing, repairs, and replacement of parts. From fixing their cars, he had a light bulb moment – he discovered that there was more value in selling the spare parts of the cars than in servicing or repairing them. With this decision, Sir Amazu became a pioneer in a trade that has since become the bread and butter of hundreds of thousands of young unschooled boys from Nnewi, including the young Cletus.

The decision to import spare parts was, as Cletus had become accustomed to, a timely and fortuitous decision. Soon after his goods arrived, the government of Shagari tightened the noose on import licenses, making it nearly impossible for anyone to get any. Historians believe that this was one of the foundations of the massive corruption in the country at the time.

The decision could not have been more delightful for Cletus. He realized that he was suddenly the only one who had stock of spare parts merchandise filled in his warehouse. Cletus quickly jacked up prices by 500%, yet it did not deter the multitude of resellers looking to also profit from the artificial scarcity created by the government of the day.

In a report, Cletus relived gleefully how pivotal that moment was for him. “We were packing money in cartons,” he remarked. Within two days of the arrival of his containers, he had made about “4 million pounds”. A combination of fortuity, government magic and timing had made him an instant millionaire, opening the floodgates for what would become a mega empire at the heart of South-Eastern Nigeria.

Enter the Challenger

About 800 kilometers away from the burgeoning empire of Cletus Ibeto was a 22-year-old man by the name of Aliko Dangote. Aliko had put to work the N500,000 he received from his uncle as startup capital and was settling into business in his newly adopted trading city of Lagos, South West Nigeria. Little did Dangote and Ibeto know that their paths would cross in a riveting tale of rivalry, reminiscent of that fateful day on the battlegrounds of the Biafra civil war.

In 1997, the already powerful billionaire and president of the sprawling Dangote empire, Alhaji Aliko Dangote, was thinking about pivoting his strategy. In the past 20 years since he moved to Lagos, he had built a reputation as a fierce competitor and a near monopolist in most of the business areas he played in. The young Aliko’s path to riches started with the importation of sugar and rice from Brazil and Thailand respectively. As a young man in the early eighties, Aliko understood the power of monopoly and crony capitalism.

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He quickly secured exclusive importation licenses for sugar, rice, and cement, beating out every competition that stood in his way to market dominance. In one unconfirmed story, a rival importer attempted to cut Aliko’s dominance in the sugar market by importing tons of sugar into the country. On getting wind of this imminent threat, a call was made to ranking customs officials, about possible contraband goods making their way into the country. The container of sugar remained stuck at the ports for weeks as demurrage accumulated to the dismay of the bewildered contender.

As he racked up losses, he received a lifeline from none other than Alhaji, offering to buy his product at less than half the price. Such was the palpable fear competitors had of Alhaji, that stories of him stifling rivals out of business became folklore among traders, critics, and admirers alike. Despite the criticism of the young Alhaji, rivals and critics could not but admire his astute craftsmanship and ability to thrive where others had failed. He succeeded where many had failed and ran an empire that dominated the breakfast tables of nearly everyone living in the country.

In one of his trips to Brazil, Aliko was smacked by a sudden reality. Why continue importing products into Nigeria when he could cut out the middlemen and produce same locally in Nigeria? In fact, why not import and manufacture at the same time? The thought of this was exciting and he wondered why he had not done this all along. To enjoy total dominance, he had to own the entire value chain, from production to distribution. This would give him ample powers to control the pricing and dictate supply requirements. It was to be his greatest decision ever.

In the year 2000, Dangote Sugar Refinery commenced business as a subsidiary and sugar division of Dangote Industries Limited. A year later, they commissioned the 600,000 mt-capacity sugar refining facility in Apapa, Lagos. Raw material input from the refinery came from the company’s 200,000-hectare sugar plantation, thereby solidifying his business model of owning the entire value chain.

To support local industries, the newly elected Obasanjo Government, on the advice of his economic team and industrialists like Dangote, introduced protectionist measures that stifled importation. The government introduced high tariffs and gave tax breaks to mega traders investing in local manufacturing. The government did not stop there. Convinced that local manufacturers required a period of tutelage before they could become fully independent producers and meet the demands of consumers, they allowed manufacturers to import the same products that they manufactured. The policy methodically termed backward integration, would become the playbook for Dangote’s next business juggernaut.

Successive Nigerian governments have tried several policy measures over the years in the bid to diversify the economy and enthrone self-sufficiency in the country. In the military era, which lasted between 1983 and 1998, billionaires like Cletus Ibeto and Aliko Dangote enjoyed massive government tax cuts and import waivers that guaranteed monopolies in their respective industries.

But under President Obasanjo’s regime, local business monopolies enjoyed some of the largest import duty waivers ever granted by a government. According to one report, President Obasanjo granted import waivers to about 1,843 beneficiaries in 2007 that cost the government over N165 billion in revenue losses. Critics of the government cited the need to secure re-election contributions from powerful donors from the private sector as motivation for the waivers.

Some of the beneficiaries included powerful private businesses that controlled swathes of the economy. It included the likes of the Redeemed Christian Church of God, Mandarin Hotels, Le Meridien, Federal Palace Hotels, members of the diplomatic corps, companies fronting for top government functionaries, Stallion Group (who used it to import rice), and of course the Dangote Group which, report claimed, got as low as 5% as concession for importing sugar.

In a report in 2011, the Senate had declared that Nigeria lost about “N1.3 trillion to waivers granted on the importation of rice and other agricultural commodities between 2011 and 2014.”

As is typical with successive governments, policy pronouncements are reversed immediately power changes hands. But for some astute businessmen, 8 years is just about enough to set the stage to own one of the most sought-after assets of the Federal Republic of Nigeria.

Dangote Cement Empire

It was January 1, 1992, the advent of the new republic in a soon to be the democratic republic of Nigeria. The Military President, Ibrahim Babangida, had just concluded the first phase of an election in fulfillment of his plan to hand over power from military to civilian governance. On that day, democratically elected governors were sworn in for an initial period of 4 years.

One of the men sworn in as Executive Governor was Abubakar Audu of Kogi State, a state that had just been created a year earlier. The Prince, as he was often referred to, was renowned for his flamboyant dress sense, charisma, and government-initiated private enterprise. As Governor, one of the first businesses the Prince initiated was the creation of Obajana Cement Plc in 1992.

The Prince believed that the cement plant would launch the newly created state into economic prosperity, creating jobs and increasing alternatively generated revenue. The state did not have the technology or technical know-how to achieve this objective, but with the huge deposit of limestone located in the state, all he needed was to find the right foreign technical partners who would help explore the natural resources which God had endowed the state with. It was a time-tested template and surely it would work, once the state showed enough commitment under his leadership.

Unfortunately, the plan was truncated a year later, as the Military Junta led by Ibrahim Babangida annulled the 1993 Presidential election, sending the country into a political tailspin that would usher in a period of political instability, and eventually lead to a power grab by one of the most ruthless dictators ever to rule Nigeria.

Despite the initial setback, Prince Audu’s two-year stint as Governor had left an indelible mark in the minds of the people of Kogi State and they rewarded this by re-electing him 7 years later in 1999, under a new democratic dispensation led by President Olusegun Obasanjo. In June 2000, one year after being sworn in again, he led a delegation to Israel, France and Germany to source technical experts that would work on the project he had conceived in his first term.

Prince Audu and his team believed that cement deposits found in Obajana could last about 50 years and had the potential to produce over 5,000 metric tons of cement per day if it became operational. They had estimated the cost of the project at about $268 million which would be funded via an equity contribution of both the state government and private sector. Plans to raise debt was also considered as a prerequisite for achieving this objective.

Working with Kogi State Government was Exim Bank in the US and Nov Turkey Cement in Turkey. In fact, following the visit of President Clinton to Nigeria, reports at the time suggested that the United States Government had “released the sum of 750 million dollars to a firm known as Collarado in the US for feasibility studies and exploration of cement deposits at the Obajana Cement Company in Kogi State.”

Elected on the promise to revive the ailing Nigerian manufacturing sector, President Obasanjo had banned the importation of cement but lifted this ban for Obajana to allow it import “BAC Cement to test the market” despite the hesitation of former Finance Minister, Alhaji Adamu Ciroma.

This concession would serve as a template for others looking to delve into the business of cement manufacturing in the country. Two years down the line, politics and mismanagement would slow down the actualization of this dream. By 2003, Prince Audu lost a re-election bid to Alhaji Ibrahim Idris.

As expected, the newly elected governor accused the Prince of massive corruption, paving the way for a trial that would last years. The newly elected government claimed that some of Prince Audu’s policies had cost the state billions in debt.

In one accusation, they claimed that on takeover of office in May 1999, the Abubakar Audu government inherited a foreign debt of $6.34 million. This debt today stands at $341 million, or about N43 billion and a deduction of N50 million is being made from source.

These accusations and counter-accusations stalled most of Audu’s economic initiatives in the state, including the Obajana Cement Company. By the time he left office, the project remained dead, leaving the state with a project that it had no will to pursue. Then came a white knight.

Dangote’s Quest for Cement Dominance

After successfully launching his 600,000 mt-capacity sugar refining facility in Apapa, Aliko Dangote set his sights on something even larger. To achieve the massive economic dominance he wanted, it was important that he identified another commodity that was in heavy demand in Nigeria but with little to no local refining or manufacturing capacity. In continuing with his business model of controlling market share and dictating prices, Aliko Dangote and his team of advisers wanted a product that would, in a sense, dominate every household in the country.

Sugar, rice, and flour were all staple foods and already garnering his rising group a significant market share. However, these products faced massive competition and the barrier to entry was somewhat low when compared to the options at his disposal. He wanted something that could scale, was hard to compete against, and fit the government’s serial rhetoric of self-sufficiency. That option was cement!

Cement business, just like sugar, salt, and flour, was not new to Aliko Dangote and it was something he had been trading in since the early eighties. Back then, the company imported bulk cement into its port terminals in Apapa and Port-Harcourt and then bagged to sell in retail in Nigeria.

It had made an incredible amount of money doing this business throughout the military era and as expected, secured a huge chunk of the market share in addition to several layers of alleged import waivers.

But as the nineties drew to a close, the Dangote Empire decided that it was time to pivot into manufacturing; with the successful launch of Dangote Sugar Refinery, cement was the next big move for the conglomerate and there was no better time than in an era of national optimism under the leadership of pro-nationalist President Olusegun Obasanjo.

Unlike Dangote Sugar, the model for pivoting into cement manufacturing had to be different for Dangote Cement. It required a different form of investment and a legendary battle that would take on an ethnic tone and eventually fought on the pages of newspapers, in communities and villages, and far into the corridors of power. It would eventually be a winner-takes-all battle.

In the year 2000, the newly elected government decided in earnest to continue with the privatization programme laid out by former Military President, Ibrahim Babangida. The privatization programme, which started in several phases, commenced with the sale of government shares in some publicly listed companies and other privately registered entities.

The companies earmarked for sale included National Oil and Chemical Marketing Company Plc (NOLCHEM), African Petroleum Plc (AP) and Unipetrol Nigeria Plc, West African Portland Cement Company Plc (WAPCO), Benue Cement Company Plc (BCC), Ashaka Cement Company Plc (AshakaCem) and Cement Company of Northern Nigeria (CCNN).

It also included 3 banks, namely, FSB International Bank Plc, NAL Merchant Bank Plc and International Merchant Bank Plc. Two of the Cement companies listed for sale, WAPCO and BCC, interested the Dangote Group considerably. At the time, Nigeria had eight cement plants owned by seven cement producing companies. WAPCO, with factories in Ewekoro and Sagamu was, at the time, the largest cement company in the country.

Nigeria was said to also have an estimated total installed capacity of 5 million metric tonnes per annum for the 8 plants, against a demand of about 6 million metric tonnes per annum. However, with challenges from poor power supply, shortages of alternatives such as fuel and diesel and high-interest rates, local production was just 2.5 million metric tonnes per annum.

BCC, Blue Circle Industries, after acquiring government’s stake, owned about 51% of WAPCO, while the O’dua Group was listed as the other significant shareholder of the company. Before the acquisition, BCI owned about 39% of WAPCO.

At the end of the privatization, the Federal Government had sold its 16.5% stake to Nigerians in the capital market, resulting in an ownership of 26.82% for the Odu’a Group, 22% to diverse investors and 51% to Blue Circle.

Another cement company slated for sale was Nigercem, with 40% ownership by the governments of Abia, Anambra, Ebonyi, Enugu and Imo states, and another 11% by the Federal Government. As the eastern states dithered on selling their 40% stake, the FG sold off its stake on the floor of the stock market, leaving the state governors reeling.

With Nigercem and WAPCO gone, Dangote set his sights on the only available cement company yet to be privatized – BCC. The decision to acquire BCC was strategic for Aliko Dangote. The Benue Cement Company was one of 7 indigenous cement companies operating in Nigeria.

The company is located in the Mbayion District of Gboko in Benue State, where an abundance of limestone deposits can be found. In its early days, the company had a production capacity of 900,000MT and sold the popular Lion Brand Portland cement. The strategic location of the plant was such that, the Lion Brand Cement could be sold within the middle belt, Northern and Eastern states of the country.

For Dangote, this was critical to his quest to ratchet up market share and secure distribution channels. But acquiring BCC wasn’t going to be easy. It came at a huge cost that turned out to be not just financial but also brought him enemies in a part of the country, who held back their acquiescence with disdain.

It was April 19, 2000, and the National Council on Privatisation (NCP) opened bid for the prospective core investors to show interest in the acquisition of the FG’s stake in Benue Cement Company Plc. Top bidders included Dangote Industries Limited, Blue Circle Industries and Swiss-based Cementia.

Ahead on the list of potential winners of the bid was Cementia, which not only held 4% stake in BCC, but was responsible for the design and construction of the factory. It also managed the plant on behalf of its shareholders. Blue Circle already owned 51% stake in WAPCO and also looked like a formidable suitor for Benue Cement’s ownership.

The third bidder, Dangote Group’s claim was that it owned a 750k metric tonne per annum bagging terminal in Lagos. Without any considerable experience when compared to the other bidders, it seemed that Dangote had no chance of winning. To win this bid, the 43-year-old Aliko Dangote would have to fight his greatest battle yet and gore an ox or two along the way.

The battle for BCC

As the bid opening for the sale of BCC drew closer, the trio of Dangote, Blue Circle, and Cementia sharpened their strategies. For Blue Circle, its experience in running a cement plant was a huge advantage and no one could question its credibility. For Cementia, the 4% stake it had in BCC and its status as operator and builder of the plant put it in a position of strength that the others did not have.

For Aliko Dangote and his group, exploiting the weakness that was inherent in his competitors was going to be his apparent strength. A weakness neither of them knew they had and a strength so potent, it would come to be synonymous with Aliko Dangote for many years to come.

Long before the bid, the contenders took their battle to the media. In a government-sponsored privatization, failure to have a winning media strategy is as bad as not having the money to pay. The stage was first set when then President Olusegun Obasanjo reiterated that, “we will ensure that in every instance, the ownership will not be concentrated in the hands of a few private owners, such that there will be an impression of transferring public companies into private monopolies.”

This statement, as innocuous as it may have seemed at the time, packed a lot of punches. No sooner had it been uttered than we saw the first salvo fired against none other than Blue Circle. In a magazine article about the transaction, Blue Circle was accused of trying to corner the entire cement market, having already owned 80% of the market, in view of its shareholding in Ashaka Cement and WAPCO.

In another article, an anonymous source claimed that Blue Circle was “buying the good cement companies to thereby trap Nigeria so that they can reap monopoly profits.” Another article quoted a PDP stalwart, Alhaji Bala Ka’oje, who chimed in by stating that he thought “it is better for the government to stop the exercise until the Decree is reviewed to ensure a free and fair privatization exercise because the decree as it is now is not explicit.”

The decree he was referring to was the indigenization decree that was promulgated under the leadership of military leader, Olusegun Obasanjo who incidentally was now the democratically elected president. To make matters worse for Blue Circle, rumours started spreading that it would soon be acquired by Lafarge and that it was all a ploy by the French company to corner Nigeria’s cement market.

Only one person stood to benefit from all this – Aliko Dangote. With Vice President Atiku Abubakar and then head of the BPE, Mallam El Rufai on his side, the odds were stacked in favour of Aliko Dangote. But it wasn’t going to be easy. As the media battle ensued, Blue Circle also stepped up its campaign to control the narrative.

Doubts about Dangote Group’s experience as a cement producer started to gather storm in the most unlikely places. A cross section of people from the Mbayion community commenced writing petitions, calling him an economic saboteur. In the petition, they claimed that “the bid by Dangote had ulterior motives and has the effect of finally nailing the coffin of BCC so that Benue State would perpetually lag behind in economic development and therefore conform with their political agenda, which is economic domination.”

A month later, reports emerged that Lafarge had acquired Blue Circle UK and merged with Cementia, thus effectively controlling the African cement market. The media war that started a month earlier, raged on as opinions became divided on whether to sell the company to a multinational or to a Nigerian owned company, whipping up sentiments of nationalism.

Results of the bid indicated that Dangote Group offered N5.30, while Lafarge offered N5.35 per share. Yet, sentiments and political pressure had swayed the bid in the favour of Dangote Group. Blue Circle reportedly pulled out, while Cementia Lafarge “fell out technically” and did not bother to bid again. To the consternation of a lot of people, the Dangote Group eventually paid N918 million to acquire BCC in the summer of 2000. While he won the battle, the outrage that would ensue cast a cloud over the entire transaction.

The host community lashed out furiously, and most indigenes of Benue State believed that they had been shortchanged. The matter generated so much controversy, that the National Assembly had to wade in and conduct a hearing to deliberate on the matter.

One of the most vocal citizens of Benue State against this acquisition was then Minister of Industry, Iyorchia Ayu. In one of the hearings, he accused Vice President Atiku Abubakar of single-handedly giving anticipatory approval to the takeover of BCC by Dangote. According to one account, Ayu claimed that as at July 1999, Dangote had no plans to buy BCC and only declared intent by the end of the year.

He also claimed that Dangote had insisted that he would take over the company “no matter whose ox is gored” and put out an advertorial with the expression, “to support domestic capital and indigenization” of Nigerian companies. Despite all the tirades and community backlash, Dangote had the support of the government of the day who made sure that the acquisition was irreversible. With BCC in the bag, Dangote set his sights on the next-door neighbours.

Capturing Obajana Cement

Two years later in 2002, Dangote Industries Limited invested in the Obajana Cement plant, then owned by the Kogi State Government. Unlike the controversial BCC transaction, the Governor of Kogi State, Prince Audu, was more favourably disposed to the sale and courted Aliko Dangote, who reciprocated in kind.

In a quote attributed to the then 46-year-old billionaire, he expressed his admiration for the governor, who was seeking a reelection at the time. “Under the able leadership of Prince Abubakar Audu, the crown Prince of the Niger, Kogi State is setting the pace in mutual business relationship with us as the local partners in the industrialization of the state in particular and the nation at large.”

With BCC and Obajana fully secured, the Dangote Group went for the next big leverage. The government of Obasanjo granted the group investment incentives to help the group consolidate on its investments.

Minister for Transport, Ojo Madueke, disclosed at the end of a Federal Executive Council meeting that Dangote Industries’ three plants, Ibeshe (Ogun State), Obajana (Kogi State) and Odukpani (Cross River State), would be granted pioneer status in the area of cement production for seven years.

The government also granted the firm 2.5% duty on all plants, machinery and quarry equipment, exemption from payment of the Value Added Tax (VAT) on all plant machinery and quarry equipment, as well as the payment of 5% duties on construction materials not available in the country.

According to a newspaper report, Madueke explained that Dangote Group had requested that it be granted pioneer status for 10 years, exemption from payment of duties on all plants machinery and quarry equipment, exemption from payment of VAT on all plant machinery and quarry equipment, exemption from payment of duties on construction materials not locally available, massive road construction at sites of the plants by the Federal Government, as well as the permission to import five million metric tonnes of bulk cement at a maximum rate of 5%.

In addition, the government introduced a policy that completely banned bagged cement importation and phased out bulk cement importation over a five-year period. With the acquisitions completed and incentives secured, Aliko Dangote was well on the path to being the single largest cement producer in Nigeria.

Having shown Lafarge what he could do with the state on his side, no one could dictate the direction of the market and no company could dare compete with his empire. That was until an unfamiliar foe, in the name of Cletus Ibeto decided that it was time to disrupt the cement market, not by producing but importing cement; a move that not only threatened to crash the price of cement, but precariously threatened the very existence of Dangote Cement as a market leader in cement production in Nigeria.

Ibeto back on track

As Dangote consolidated on the expansion of his production capacity, Cletus Ibeto also stepped up plans of owning the South East area of the cement market. Ibeto had received a “permission” from the government to allow it import “an unlimited quantity of cement” for 10 years which did not require that he back this up with proven investment in local production of cement.

This apparently gave him some advantages over the likes of Lafarge and Dangote. Realizing the imminent threat, Lafarge petitioned the Obasanjo government, which quickly banned the importation of cement by Ibeto Group, ultimately leading to the ill-fated clampdown on its Port Harcourt warehouse in 2005.

Believing this to be a temporary misunderstanding, Ibeto put across calls to people in positions of influence to help overturn the ban. As he worked his contacts, he was duly informed that whilst Lafarge was the primary petitioner, the biggest threat to the opening of the plant was the Dangote Group.

The company had just helped fund President Obasanjo’s reelection bid and was by then, well in bed with powerful government officials in charge of setting economic policies. Ibeto pondered on how he could salvage the situation. At risk was about 180,000 metric tonnes of bulk cement, waiting to be discharged by six vessels. In February 2006, Ibeto wrote a passionate letter to President Obasanjo begging for the President’s “understanding in respect of whatever transgressions I might have been accused of.”

The content of the letter suggested a man that was losing it financially and mentally. In one of the paragraphs he said, “I have no intention to open up an argument on this matter, but only wish to crave your indulgence for a merciful and fatherly intercession, and to pledge that in all my dealings, I shall always remain faithful, and align myself with the hallowed ideals and laudable programmes of your government”.

He went further, “I have with great trepidation and despair, noted the depth of your disenchantment towards me and realize that I can only hope on your renowned Christian magnanimity, that there is space left in your large Christian heart to afford me the mercy I crave and give me the opportunity to prove my good faith towards this government and its programmes.

“I make this solemn promise; that if Your Excellency will revisit the issue and resolve it in a manner that will enable me to avoid utter ruin, I shall employ all that is salvageable from my cement concerns, to focus on the work going on towards the actualization of my planned cement project in Ebonyi State, to ensure that the factory is completed in record time.” Ibeto again sent another letter to the President in March 2006 entitled “Further Appeal for Clemency” pleading that “All the structures and systems the Ibeto Group has laboriously built over the years are rapidly crumbling, and may totally collapse if there is no succor coming to us soon…”

As Ibeto wallowed in despair, Dangote Cement’s business took shape and started to soar. By 2005, the cement business was unbundled from Dangote Industries Limited, keeping it as an entity on its own. Construction of the company’s first cement production plant in Obajana was also underway and progressing positively.

Dangote’s plan for domination in the cement industry was, in hindsight, very well executed. The acquisition of BCC was strategic for Dangote and the media and reputational battle that followed the transaction was worth the sacrifice. By acquiring BCC, the company had a cement plant that was already in operation. This ensured that it could not only generate cash flows to fund working capital requirement, it also had the leeway to import cement in line with the government’s backward integration plan. Obajana on the other hand would be a new cement plant, built with modern infrastructure that enabled cement production at an efficient economy of scale. Same model in Obajana would be replicated in Ibeshe.

While rumours suggested that Dangote could be behind the apparent rejection of all pleas from Ibeto. The billionaire tried as much as he could to stay away from the matter. But it was not until July 2007 that newly elected president, Alhaji Musa Yar’Adua granted Ibeto his wish by reopening the Ibeto Cement Plant in Bundu Ama, Rivers State, allowing him to manufacture and import cement once again.

The closure of the Ibeto factory was a humbling experience for the Nigerian business magnate. As he pondered on what he had just been put through, his mind flashed back to the many battles he had fought and survived. After a Supreme Court Judgement made him lose a bank in the nineties, the billionaire had embraced the humiliation of sitting for WAEC exam at the age of 48 and later bagged a degree in accountancy at the age of 48. He also recalled turning down a huge opportunity to export refined “lead products” to former Iraqi President Saddam Hussein citing ethical considerations as the reason. This decision cost him significant amounts of money that he could have invested in this same Bunda Ama Creek cement bagging factory that had been banned by the Obasanjo Government.

For about two years that his cement bagging plant was shut, the likes of Dangote Group and Lafarge had forged ahead. In that year, Dangote Cement’s Obajana Cement Plant with two production lines and a capacity of 5 million tonnes per annum was commissioned. Lafarge had merged with Cementia and acquired Blue Circle to become Africa’s dominant cement manufacturer. For Ibeto, it would be about setting the restart button for a business he always thought was the most lucrative anywhere. He once remarked, “Cement is one of the best businesses in the world….it is better than crude oil.” Ironically, his return to the market was positively received by his competitors (at least in the media).

To compensate Ibeto for the two years’ loss of business, the government of Musa Yaradua granted his own tax breaks. Ibeto Group was granted a 5% duty waiver and allowed to import cement “VAT free as compensation.” One columnist reported that the move gave Ibeto Cement a cost reduction of about 12.5%, compared to what other importers were getting. Ibeto was also accused of selling cement to distributors at a price inclusive of VAT; Ibeto denied it.

On the 19th of September, 2007, Ibeto opened the Ibeto Cement Factory in Port Harcourt, Rivers State, taking delivery of about 35,000 metric tonnes of bulk cement from Indonesia, which was the equivalent of about 1,750 bags of Cement. He imported raw cement and then bagged it for resale, not to be considered as manufacturing of cement. Ibeto also promised to do whatever it took to bring the price of cement down and promised not to “allow the monopolistic gangs take over.”

He also boisterously told reporters that cement should sell for N1,250 per bag and predicted a crash in the price of cement in the future. Despite all the rhetoric, Ibeto Cement still did not locally manufacture cement and cement prices never came down. By December, the price of Cement had risen to N1,850 per bag, in what many blamed on Government’s failure to renew import licenses.

This built up pressure on the Minister of Commerce and Industry at the time, Charles Ugwu, to reverse the controversial ban on importation of cement. Those against lifting the ban believed that local manufacturers needed time to attain a production capacity that would surpass local demand and therefore crash prices. In the interim, Nigerians had to pay the ultimate sacrifice by paying higher for cement. The Government granted tax breaks, allowing local manufacturers to build enough capital to fund capacity expansion.

Official estimates in 2007 placed Nigeria’s annual demand for cement at about 17 million metric tonnes, as against local manufacturing capacity of about 8.46 metric tonnes. Local manufacturers only accounted for about 43% of total supply, while imports made up the balance.

The implication was that, so long as local demand outstripped supply, cement prices would remain high. But with the government determined to grow local production capacity, local manufacturers of cement like Dangote and Lafarge had enough incentive to continue to invest in capacity expansion, even if it meant that Nigerians paid a premium for this sacrifice.

Ibeto knew he still could not be referred to as a manufacturer of cement and had to do something about it. In October 2007, he announced that he would be commencing cement production from limestone in Ebonyi State. However, the Bundu Ama factory would grow to have a Flat-storage capacity of 50,000 metric tons and a production capacity of 1,500,000 tons per annum, producing about 6,000 metric tons per day.

It also boasted of two (2) production lines with a total production capacity of 5400 of 50kg bags per hour. Having lost out on some of the existing cement plants in the country, Ibeto turned his sights to the South East where he had a foothold. Just like Dangote, he zeroed in on a troubled moribund cement manufacturing plant which had been privatised by the Government in 2001.

Eastern Bulk Company won the bid as core investor in Nigercem, owners of Nkalagu Cement plant, Nigeria’s oldest cement plant located in Ebonyi State. Nigercem was once a bastion of Eastern industrialization. Upon its acquisition, Eastern Bulk Company held on to 60% of the stock, while Ebonyi State Govt owned 10%. The rest was owned by Nicon and the public. Unfortunately, for over a decade, the promise of bringing back the glory days of cement production in the South East did not materialize from the privatization. The plant remained comatose and rather than create jobs for the people of Ebonyi State, more jobs were lost.

This situation made the plant an obvious target for Cletus Ibeto and so in 2011, he acquired Eastern Bulk Cement Company. Unfortunately, the same fate that befell Aliko Dangote’s acquisition of BCC, in a way affected Cletus Ibeto’s acquisition. In the case of Ibeto, he garnered the support of the community, while the state government, led by Martin Elechi, was fiercely against the acquisition. The Ebonyi State Government believed that the company had shown over the years that it was incapable of turning around the historical cement plant; thus, it moved to revoke the acquisition of Eastern Bulk by the Ibeto Group.

This was 2014 and Martins Elechi was taking on a different Cletus Ibeto. Having fought so many battles and survived scathed and unscathed, he had learnt too much to be pushed over. He knew that to remain an importer of cement, he had to own a cement manufacturing plant. By acquiring Eastern Bulk, no one, not even a state governor would stop him. He went into overdrive. He started by using the power of the media to force the narrative against the embattled Ebonyi State Governor.

Ibeto also cornered leaders of the host communities in Nkalagu to his side. Elechi fought back hard and soon dethroned the three traditional rulers of Nkalagu community. Elechi also revoked the Certificate of Occupancy of the land upon which Nigercem was operating.

Aides of the governor remarked, “As we warn the Ibeto Group and its internal collaborators against their continued efforts to compromise and misinform innocent villagers on the true state of affairs in Nigercem, we assure the people of Ebonyi State that under his watch, Governor Martin Elechi will never enter into any arrangement or make any deal with any individual or group which will mortgage the present or future economic interest of Ebonyi people.” Ibeto heard the comment and laughed hard, the governor did not know what was coming his way.

In the summer of 2014, Martins Elechi was engrossed in a string of impeachment proceedings in the State House of Assembly that threatened his succession plans. His advisers informed him that Cletus Ibeto sponsored the legislators who wanted to impeach him. Ibeto, of course, denied it remarking that “I remain a businessman; that man should stop being afraid of his shadows.”

The infighting in Ebonyi State continued as Governor Martins Elechi supported his Minister of Health, Onyebuchi Chukwu, to succeed him as governor. His deputy, David Umahi, felt aggrieved alleging that his boss had reneged on a pact to support him as the next governor. Between 2014 and the end of Elechi’s tenure in 2015, he ended up facing one political battle after another. In one of the most infamous standoffs, arson was committed at the state house of assembly and the governor barely survived an impeachment notice.

Eventually, David Umahi won the primaries and was elected governor of Ebonyi State. The new governor unsurprisingly favoured Ibeto’s ownership of Eastern Bulk Company and chided his predecessor for stalling the acquisition. “I advised him on the case of NigerCem and the clergymen also did. By now, Ibeto would have revived the company but he refused.” Umahi remarked. As Ibeto and Umahi rekindled their love and triumph, Martins Elechi faced EFCC quizzes and also had his 8 year tenure as governor probed by his successor. The probe still continues today.

Cement Power

As history has taught us, the cement industry’s relationship with crony capitalism is alive and entrenched. The role of the Federal and State governments cannot be overemphasized. For Ibeto and Dangote, the path to ownership was similar in many ways, even as both continually blamed each other for their successes and downfalls. In the case of Ibeto, the setback between 2005 and 2007 was costly, though he has tried to recover through the acquisition of Nigercem and the operations of his cement plant in Rivers State.

For the people of Benue State, their ownership of BCC dwindled from 29% to under 5% by 2009 a year before the merger. By 2014, their ownership stake had dropped to zero. The Governor of Benue State, Gabriel Suswam had presided over the sale of about 43 million units for a total purchase consideration of about N9.6 billion. In a twisted irony, some of the people of Benue State who had once resisted the acquisition of BCC by Dangote, vehemently criticized the sale.

Just like in the case of Ebonyi, the successor of Suswan, Dr Samuel Ortom commenced probe of the sale but to no avail. Indeed, George Akume, another Governor had halted the court process and probe into Dangote’s acquisition of BCC years earlier. But for Aliko Dangote, he would only soar to higher heights. In July of 2010, he changed the name of Obajana Cement to Dangote Cement.

Two months later, he oversaw a scheme of merger between Dangote Cement and Benue Cement and in October of the same year, listed Dangote Cement on the Nigerian Stock Exchange. In 2012, he opened the Ibeshe plant in Ogun State with 6 million metric tonnes capacity. That same year, Obajana increased its capacity by 5 million metric tonnes. By 2014, Dangote Cement had expanded into other countries.

In 2010, Forbes ranked Aliko Dangote as the 463rd richest man in the world, estimating his net worth at $2.1 billion. A year later, he was named the richest man in Africa with an estimated net worth of over $10 billion. By 2018, Dangote Cement revenues had grown from about N61.9 billion in 2008 to over N800 billion in 2018. Within 18 years of the acquisition of BCC, the cement company has grown to be largest in Africa, with a market value in excess of N3.6 trillion.

Because of this incredible feat, the Dangote Group is seen by many as one of the most revered companies in Nigeria. Critics blame the roles of successive governments for its commanding market share. On the other hand, some cite the rising price of cement, juxtaposed with the incredible profit margins posted by Dangote Cement as proof that Nigerians are being shortchanged.

In 2017, its earnings before interest, tax depreciation, and amortization (EBITDA) margin was up 51% to a N388 billion at a 48% margin. Earnings per share is up 33% and dividend up 24%. Dangote Cement had also ramped up its capacity to about 29Mta in Nigeria, over 65% of market share and 46Mta across Africa. Obajana’s capacity will rise to 13.25Mta, Ibeshe 12Mta and BCC, the plant that started it all, with 4Mta. Dangote Cement is also present in several African countries spreading beyond the reddish sands of Mbayion.

Never did a 43-year-old Dangote believe that 18 years later he would be this rich, He still owns almost 90% of the company which is expanding into several countries within sub-Saharan Africa, perhaps replicating the same model that had worked so well in Nigeria. For Cletus Ibeto, even though he publicly remarked that he had “forgiven and forgotten” he will forever silently blame Obasanjo as the man who nearly killed his dreams.

The closure of his cement plant caused him billions of naira in lost revenue and value and cost him a significant portion of the local cement market share. However, Ibeto has fought too many battles not to know that you only live to fight another day. With the successful takeover of Nigercem, he can start to rebuild and expand eastwards. On his side are some American investors who recently declared an interest in acquiring a stake in Nigercem.

It is a familiar playbook used by his fiercest competitors: get a technical partner, raise foreign funds, get state and federal government support and concessions, commence production and corner a portion of the market. The cement market is different from what it was 10 years ago and Ibeto knows that there is little to zero chance that he will control market share.

Aliko Dangote has demonstrated what can be achieved when you have guts and government by your side. Ibeto had all the guts any businessman could ever wish for but now, he knows that in the cement market, there is no glory without government.

Materials for this story were obtained from annual reports, press releases, information memorandum, NSE filings, company websites and other publicly available information. This is a Nairametrics creation.

Reprint, curation, adaptation or re-posting this story without the consent or approval of Nairametrics will be viewed as plagiarism.

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