DONGOTE DOMESTIC HIGH CEMENT PRICE

Core Reason tax Incentives for Export vs. Domestic Tax Burden

Dangote’s central argument is that the final price of cement is dramatically affected by government taxes and levies, which are largely waived for exports but fully applied domestically. This isn't a matter of preferential pricing for foreigners, but a reflection of two different fiscal regimes.

Breakdown of the Cost Savings on Exports

No Corporate Income Tax (30%): Profits made from export sales are typically exempt from corporate income tax in Nigeria, as part of the government’s strategy to encourage non-oil exports and earn foreign exchange.

No Education Tax (2%): This levy on company profits, meant to fund tertiary education, is also waived on export earnings.

No Healthcare Levy (1%): Similarly, this profit-based contribution is not applied to export income.

No Value-Added Tax (VAT - 7.5%): Exports are zero-rated. This is a global standard. Not only is no VAT charged to the foreign buyer, but the exporter can also reclaim any VAT paid on inputs (like machinery, materials) used in producing the export good.

No Withholding Tax (10%): This tax, deducted at source on transactions, does not apply to export proceeds.

The "Free On Board" (FOB) price for exports is essentially a cleaner, production-cost-plus-profit price, stripped of these major domestic fiscal burdens.

In contrast, cement sold within Nigeria must absorb all the taxes Dangote listed, which are ultimately passed on to the Nigerian consumer. The domestic price isn't just the cost of manufacturing and logistics; it's a cost-plus-taxes price.

These taxes add a direct and significant markup to the factory gate price.

Additionally, the domestic supply chain itself incurs costs (transportation, diesel, distribution, retailer margins) that are also inflated by the same national challenges like infrastructure deficits, foreign exchange volatility, and security costs factors that are relatively minimized in a direct export shipment from a port.

To sell in regional markets like Ghana, Togo, or Cameroon, Nigerian cement must be competitively priced against other international suppliers. The tax exemptions are essential to make this possible. If export prices included all Nigerian domestic taxes, the product would be too expensive and non-competitive abroad.

The Nigerian government prioritizes attracting foreign currency (US Dollars, CFA Francs) through non-oil exports. The tax forgone on exports is an investment in earning crucial foreign exchange.

The flip side is that the government's revenue from these taxes is collected almost entirely from the local market. This, coupled with high domestic production costs (energy, forex for inputs), means Nigerian consumers effectively subsidize the company's ability to be price-competitive abroad.

Dangote's explanation reveals that the price disparity is primarily a function of government tax policy, not an arbitrary business decision. He is not necessarily "charging less" abroad out of choice, but is able to invoice at a lower base price because exports are relieved of fiscal burdens that are mandatory for domestic sales. The Nigerian consumer, therefore, pays a price that includes not just the cement, but also a bundle of state levies from which the foreign buyer is exempt.