The president of Dangote Group and Africa’s wealthiest man, Aliko Dangote, has urged for the total elimination of Fuel Subsidies in Nigeria, deeming them unsustainable. These statements arise as the federal government reinstates fuel subsidies, just a year following President Bola Tinubu’s declaration to end this policy at his inauguration on May 29, 2023. In an interview with Bloomberg Television, Dangote elaborated on how the removal of Subsidies could aid the government in reducing expenses and revealing accurate petrol usage data in Nigeria.
He indicated that the current subsidy framework artificially raises prices, leading the government to spend excessively. When subsidies are in place, it leads to inflated costs, causing the government to incur unnecessary expenditures. He highlighted that several nations have eliminated fuel subsidies, indicating that Nigeria should do the same. In his comparison with Saudi Arabia, Dangote noted that although Saudis once benefited from reduced petrol costs through government support, that situation has altered, resulting in Nigeria having less expensive gasoline than Saudi Arabia, which is illogical.
Dangote refinery will produce 650,000 barrels of crude oil daily.
Its costs in Nigeria are 60% lower compared to neighbouring nations, resulting in an unsustainable system, particularly due to Nigeria’s leaky borders. A crucial aspect emphasised by Dangote is the necessity of grasping Nigeria’s real petrol usage. Currently, there are differing estimates, with some claiming a daily use of 60 million litres, whereas others advocate for lower sums. The $20 billion refinery built by Dangote, capable of producing 650,000 barrels of crude oil each day, aims to clarify these actual consumption statistics.
According to Dangote, their trucks and ships departing from the refinery will be equipped with tracking devices to guarantee transparency and confirm that the fuel is used within the area. He observed that the refinery’s tracking system would simplify the petrol distribution management, minimising inconsistencies. Such measures are expected to help the government save substantial funds by curbing unlawful fuel exports and exaggerated consumption statistics. As his refinery prepares to enhance domestic production, the country could experience an alleviation of these strains shortly. Nonetheless, the federal government has the final authority on subsidies.
Petroleum products make up 40% of Nigeria’s foreign exchange needs.
Recently, Dangote’s refinery initiated petrol sales to the Nigerian National Petroleum Company Limited (NNPCL) in U.S. dollars; however, the entrepreneur declared that from October 1, petrol will be priced in Nigerian naira. He is confident that this change will greatly reduce the burden on the naira, given that petroleum products make up 40% of Nigeria’s foreign exchange needs. Since the foreign exchange market was opened up last year, the Naira has lost 70% of its value, complicating the country’s ability to Finance fuel imports.
They will produce and sell fuel domestically to help stabilise the naira and lessen Nigeria’s reliance on dollar-denominated fuel purchases. By producing locally, they can eliminate 40% of the foreign exchange requirement, stabilising the naira. In the ongoing debate over eliminating fuel subsidies, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) advocates for greater government involvement in Dangote’s refinery. At present, the NNPCL holds a 7.2% stake in the facility, but PENGASSAN President Festus Osifo is urging for this stake to be expanded to 45%.
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According to Osifo, such an increase would improve energy Security and access for the people of Nigeria. Additionally, PENGASSAN has pushed for the government to reduce its holdings in the four national refineries, keeping merely a 49% interest and inviting key Investors to hold the majority stake. According to Osifo, this strategy, similar to the model used by Nigeria Liquefied Natural Gas Limited (NLNG), would enhance the refineries’ operational efficiency and long-term viability.