Onome Amuge
Aliko Dangote, Africa’s richest man and CEO of Dangote Group, has appealed to the Nigerian government to put an end to fuel subsidies in their entirety.
The industrialist, in a 26-minute interview with Bloomberg Television recently, Dangote urged the federal government to eliminate the subsidies, stating that the removal of subsidies would enable the government to accurately assess the country’s true petrol consumption.
During the interview, Dangote was asked if it was indeed the right time to eliminate fuel subsidies, to which he replied in the affirmative, citing the trend of countries worldwide discontinuing subsidies as well as using Saudi Arabia as a case in point.
In his explanation, Dangote noted that despite Saudi Arabia being one of the world’s largest producers of oil, gasoline prices in Nigeria are still approximately 40% lower than in the oil-rich kingdom.
Dangote further pointed out that the price of gasoline (petrrol) in Nigeria is about 60 percent lower than in neighboring countries. He noted that with such a significant price gap, Nigeria’s borders are rendered highly porous, leading to untenable levels of fuel smuggling.
Dangote reiterated the significant drain on the government’s coffers caused by the subsidies, stating that the government simply cannot afford to continue paying such substantial sums.
“Subsidy is a very sensitive issue. Once you are subsidising something then people will bloat the price and then the government will end up paying what they are not supposed to be paying. It is the right time to get rid of subsidies,” he said.
Dangote put forward his case that the establishment of the Dangote refinery will bring about significant improvements in the country’s petroleum industry.
According to Dangote, the refinery will reveal the true level of Nigeria’s petrol consumption, thereby providing valuable data that can be used to streamline the industry. He added that his company will install trackers on the trucks and ships that will transport the oil from the refinery to ensure that the products remain within the country, noting that this will help the government save quite a lot of money.
Dangote, reflecting on the challenges the project encountered, which included a five-year delay due to state government and host community-related issues, expressed pride in the achievement of finally bringing the refinery to fruition, despite these hurdles.
When asked about the impact of the fuel subsidy on the viability of the refinery, he stated that the company has a choice to either export or sell locally, highlighting that as a private company, profitability is a vital consideration. He further acknowledged the crucial role of the government in the removal of subsidies and emphasized that ultimately, it is a decision that lies within their domain.
The completion of Dangote’s refinery marks a significant milestone in Nigeria’s history, as it shifts the nation from complete dependence on imported petroleum products. This transformative development comes at a critical juncture as Nigeria weighs the feasibility of ending fuel subsidies, which cost the country $10 billion in 2022 alone.
Dangote noted that the company’s refinery provides them with the flexibility to export or sell domestically, adding that the decision to end fuel subsidies rests solely with the government.
However, he underlined the significant benefits that will accrue from eliminating gasoline imports, which he believes will ease the country’s currency pressures.
Dangote elaborated on the details of the pricing dispute between his refinery and the Nigerian National Petroleum Company Limited (NNPC).
According to the business magnate, the NNPC acquired the refinery’s fuel stock at a cost lower than the price of imported fuel. He observed that despite the savings achieved through domestic sourcing, the NNPC set a uniform price for all fuel products, including those procured from the refinery.
“There wasn’t really a disagreement, per se. NNPC bought from us on the 15th of September at the international price, which they also bought, about 800,000 metric tonnes of gasoline imported. So the one that they bought from us actually is cheaper than the one they are importing,” he said.
Dangote, discussing the proposed commencement of crude oil sales in October, disclosed that discussions were still underway with the relevant parties and a comprehensive agreement was expected to be finalized within the coming week.
Expounding on the details of the arrangement, he stated that the Dangote refinery would purchase crude oil in naira and sell it in naira, with an agreed-upon exchange rate determining the final price of the oil. He emphasised that the pricing would be consistent with the global market, in which a crude oil price of $80 would be converted into naira using an agreed exchange rate.
