Africa’s richest man, Aliko Dangote, has emphasized that now is the opportune moment for Nigeria to eliminate its fuel subsidy, especially as his refinery’s gasoline production is set to alleviate pressure on the nation’s struggling currency.
In an interview with Bloomberg Television in New York on Monday, Dangote stated, “Subsidy is a very sensitive issue.
Once you are subsidizing something, people will inflate the price, and the government will end up paying more than it should.
It is the right time to get rid of subsidies.” Despite being Africa’s largest oil producer, Nigeria has relied heavily on fuel imports due to the deterioration of its four state-owned refineries, which suffer from poor maintenance, outdated technology, and operational inefficiencies.
For decades, the Nigerian government has incurred substantial costs in subsidies to keep fuel prices artificially low for its citizens.
However, upon taking office in May 2023, President Bola Tinubu eliminated the longstanding fuel subsidy, exacerbating the nation’s ongoing cost-of-living crisis and triggering widespread protests.
The ensuing spike in inflation led to a temporary reinstatement of the subsidy. Yet, in early September, the government attempted to phase it out again by relaxing the cap on gasoline prices, although they remain below true market rates. The Nigerian government has projected that fuel subsidies will reach N5.4 trillion by the end of 2024.
The Dangote Refinery offers a potential solution to these costly subsidies, which have long been a source of corruption and have increased Nigeria’s dependence on imported refined products.
Dangote’s refinery can either export fuel or sell it locally, and he noted that while the decision on subsidies lies with the government, ceasing fuel imports would significantly reduce pressure on the Nigerian currency.
Despite reforms aimed at liberalizing the naira and revitalizing Nigeria’s economy, the currency has depreciated by approximately 70% against the US dollar, currently trading at over 1,500 naira per dollar, making it one of the worst-performing currencies globally.
The shortage of dollars in Nigeria’s foreign exchange market continues to weigh down the naira, compounded by the necessity to purchase imported gasoline in dollars.
“Petroleum products consume about 40% of our foreign exchange,” Dangote remarked, adding that fuel from his refinery, which began supplying gasoline on September 15 to the state-owned oil company for domestic distribution, “can actually stabilize the naira.”
