The Federal Government has received a strong recommendation from Alhaji Aliko Dangote, President and CEO of the Dangote Group, to fully discontinue the fuel subsidies currently in place. Dangote emphasized the critical importance of this move, suggesting that it would not only assist in accurately determining the nation’s true gasoline consumption, but also contribute to broader economic stability.
During his remarks, Dangote also revealed that his company has secured ownership of two oil blocks in the upstream sector, with an expected production start date scheduled for next month. This development marks a significant milestone in Nigeria's oil production capabilities and is expected to have far-reaching effects on the nation's energy sector.
Dangote further highlighted that the removal of fuel subsidies would reduce the strain on the naira, Nigeria’s national currency, particularly when his $20 billion mega refinery in Lagos begins production. The refinery, which is one of the largest in the world, has the capacity to refine 650,000 barrels of crude oil per day, a capability that is expected to significantly bolster Nigeria's domestic fuel production.
Speaking in a comprehensive 26-minute interview with Bloomberg Television in New York on Monday, Dangote reiterated his stance that now is the opportune time to end fuel subsidies. He argued that the discontinuation of these subsidies would have a profound impact on the nation’s economy, particularly in relation to currency stability and the accurate tracking of fuel consumption.
Africa’s wealthiest man elaborated on the potential benefits of ending petrol imports, noting that such a move would have a significant upside in alleviating currency pressures. He stated, “Subsidy is a very sensitive issue. Once you are subsidizing something, then people will inflate the price, leading the government to pay far more than it should. It is the right time to get rid of subsidies.”
Dangote also pointed out that his refinery would help resolve many of the issues currently plaguing the nation’s fuel sector. “This refinery will resolve a lot of issues out there,” he said. “It will reveal the true fuel consumption of Nigeria, something that is currently unclear. Estimates vary, with some claiming it is 60 million litres of gasoline per day, while others suggest it is less. By producing fuel locally, we can accurately measure and account for all consumption, particularly by tracking the movement of trucks and ships loading fuel from our refinery.”
He added, “We are going to put a tracker on them to ensure they are transporting the oil within Nigeria. This measure will help the government save a substantial amount of money. I believe it is the right time to remove the subsidy.”
Reflecting on the challenges faced since the project’s inception in 2013, Dangote recounted the obstacles that led to a five-year delay, including issues with state governments and host communities, as well as the burden of managing a $2.4 billion loan. Despite these challenges, he expressed personal pride in achieving this significant milestone.
When asked whether the removal of subsidies would impact the viability of the refinery, Dangote responded, “Well, you see, we have options. We can produce and export, or we can produce and sell locally. As a large private company, we must make a profit, especially after investing $20 billion in this project. Naturally, we need to generate returns on our investment.”
He continued, “The decision to remove subsidies rests entirely with the government, not with us. We cannot dictate the price, but I believe the government will have to make certain concessions. Ultimately, I think the subsidy will have to be removed.”
President Bola Tinubu initially removed the subsidy when he assumed office in May 2023, a move that exacerbated an ongoing cost-of-living crisis and sparked widespread protests. However, the subsidy was quickly reinstated as inflation soared.
In early September, another step towards ending the subsidy was taken when the gasoline price cap was eased, though the price remains below the market level. This adjustment is seen as part of a broader strategy to gradually phase out fuel subsidies.
Nigeria has historically been heavily reliant on imported petroleum products. With the advent of Dangote’s refinery, the nation is making tentative yet significant strides towards ending the costly fuel subsidies, which in 2022 alone amounted to $10 billion.