Dangote to FG: Now is the right time to end fuel subsidy
CAPE TOWN\SOUTH AFRICA, 06MAY11 - Aliko Dangote, President and Chief Executive Officer, Dangote Group, Nigeria, during the African Fellowship Programe with Young Global Leaders announcement at the World Economic Forum on Africa 2011 held in Cape Town, South Africa, 4-6 May 2011. ..Copyright (cc-by-sa) (C) World Economic Forum (www.weforum.org/Photo Matthew Jordaan matthew.jordaan@inl.co.za
Omeiza Bilal
The President of Dangote Group, Aliko Dangote, has called on the federal government to end fuel subsidies completely.
In an interview with Bloomberg Television in New York on Monday, Dangote insisted that now is the right time to end the subsidy regime has trillions of naira has been spent by the government to subsidise the product.
This just as former Presidential spokesperson, Dr Doyin Okupe, disagreed with Dangote’s position saying petrol was the lifewire of Nigeria’s economy.
The Chief executive Officer of the Dangote Group stressed that ending subsidies of petrol would not only help the country determine its actual consumption, it will also help to ease pressures on the naira.
President Bola Tinubu removed the subsidy when he took office in May 2023.
The move has since jerked up the inflation rate to about 34 per cent in 2024, before declining to about 32.15 per cent in August. Food inflation remains high at about 40 per cent.
The naira has lost around 70 per cent of its value against the dollar since rules that pegged the currency at an artificially high level were relaxed last year.
He said, “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.”
“But this refinery will resolve a lot of issues out there, you know, it will show the real consumption of Nigeria, because, you know, nobody can tell you. Some people say 60 million litres of gasoline per day.
“Some say, it’s less. But right now, if you look at it by us producing, everything can be counted. So everything can be accounted for, particularly for most of the trucks or ships that will come to load from us. We are going to put a tracker on them to be sure they are going to take the oil within Nigeria, and that, I think, can help the government save quite a lot of money. I think it is the right time, you know, to remove the subsidy.”
The continent’s richest man was however quick to note that the issue of total subsidy removal is totally dependent on the federal government noting that there is a limit to how long the government can continue to fund petrol subsidy.
He stressed that the Refinery was left with the choice of either to produce and export or produce and sell locally adding that its decision would be driven by the desire to sustain its $20 billion investment.
According to the Programme Director the Presidential Compressed natural Gas Initiative (P-CNGi), Nigeria spent over $10 billion annually in the last 15 years on petrol importation.
“Petroleum products consume about 40 per cent of our foreign exchange,” Dangote said, adding that fuel from his refinery, which started supplying gasoline on Sept. 15 to the state-owned oil company for domestic sale, “can actually stabilize the naira.”
On the pricing disagreement with NNPC Ltd, Dangote said the Refinery sold the current stock to NNPC Ltd at a much cheaper price that the current rate petrol is being imported.
Only recently, the NNPC Ltd started lifting petrol from the Dangote Refinery. The state owned oil firm had in a statement pegged the price it would sell at all its retail outlets nationwide. According to the company, it would sell in Lagos at ₦950 per litre in Lagos state.
“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 tons of gasoline imported. So the one that they bought from us actually is cheaper than the one they are importing.
“And so when they announced our price, the guy, I don’t know whether he was authorized. It wasn’t really the real price. What they have announced is most likely that is what it cost them, including profit and other expenses.
“And then the other one is one that they imported. But the people don’t know how much they spend in terms of imports, but their importation is almost, maybe about 15 per cent more expensive than ours, you know.
“So what they are supposed to do is to sell at a basket price, or if they want to remove subsidy, they can announce that they will remove subsidy, which is okay, everybody you know will adjust it.”
Dangote said that discussions are still ongoing and a detailed agreement will be finalised this week on the planned crude oil sales anticipated to begin in October.
“We will sell the crude in naira after we have bought in naira. So now we are currently working out with the committee that the exchange rate is going to be priced. It is going to be normal pricing, you know, if crude is at $80, we will pay that price at an agreed exchange rate.
“And then we will also sell in the domestic market. What that will do is that it’s going to remove 40 per cent pressure on the naira. So because, see, the petroleum products consume about 40 per cent of foreign exchange, so you know, and then, you know, it’s like you have 40 per cent of demand been taken out so that can actually stabilize the naira and even if they subsidise, they would know what they are paying for.
“The deal is to give the government something that they want. It’s also a win-win situation for all and it would benefit the country.
“Currently, discussions are still ongoing to determine the details of the agreement. They are working out something that I think would be a win-win between us and the NNPCL.
“The agreement is very robust. Well, first of all, we would have energy security where they will give us crude. For example, in October, they’re going to give us 12 million barrels, which is on average, about 390,000 barrels a day, which will sell gasoline, diesel, and aviation fuel.”
In his reaction, Okupe said Dangote’s call on the federal government to totally remove petrol subsidy was not correct.
Okupe insisted that in every economy, the government provides one form of subsidy or the other to its citizens.
Okupe said: “With utmost respect, I disagree with Aliko Dangote on his suggestion that the government should completely end subsidy now.
“Petrol is the economic oxygen of Nigerians, whether rich or poor. This is not the situation in other countries of the world.”
The former Director-General, Peter Obi Presidential Campaign, said that with the coming up of local refineries, some level of succour should be given to Nigerians.
According to him, with the allocation of 450,000 barrels a day for local consumption, Nigeria can combine the advantage of local production with local consumption and determine the price to sell to crude to local refineries.
“We can use opportunities that these local refineries avail us, ensuring adequate fuel supply with the dedicated or allocated daily crude oil for local consumption, which is outside OPEC quota.
“So, whatever we do with it is our internal affairs, it is a way of providing some level of comfort.
“We can sell this daily crude oil allocation for local consumption cheap to determine average pump price of PMS (Premium Motor Spirit) in the country.
“For instance, the price of Nigerian crude per barrel is $77, we can decide to sell to Dangote refinery at $35 or $37 per barrel, thereby having made adjustments of processing fees and profit margin, the pump price of petroleum can actually come down to N500 or N600 per litre.
“This will definitely bring a major relief, comfort and succour to the masses,” he said.
Okupe said that ending importation of petroleum products would reduce the tension and pressure on foreign exchange demand by 40 per cent.
“This will give economic oxygen to Nigerian people, encouraging enterprises and local businesses because we all in Nigeria, rich and poor, depend on petrol as economic oxygen.
“Every nation has a sector where it stands behind the people,” he added.
“Having done it for more than a year, my feeling and belief is that we have made enough gains, and because these refineries are upstream, we can consolidate on those gains and release the pressure on the masses a little bit.
“Fortune has played in our hands by the coming upstream of the Dangote refinery, Port Harcourt refinery and other refineries that will follow,” he said.
