Nigerian billionaire Aliko Dangote said the “time is right” for the West African nation to end a decades-long subsidy on fuel, as gasoline production at his mega refinery near Lagos helps to ease pressures on the country’s battered currency.
“Subsidy is a very sensitive issue. Once you are subsidizing something then people will bloat the price and then government will end up paying what they are not supposed to be paying,” the tycoon told Francine Lacqua during a Bloomberg Television interview in New York Monday. “It is the right time to get rid of subsidies.”
Africa’s largest oil producer, which until Dangote’s refinery came on stream was fully dependent on imported petroleum products, has been taking tentative moves to finally end the nation’s pricey fuel subsidies, which in 2022 cost $10 billion.
President Bola Tinubu removed the subsidy when he took office in May 2023, exacerbating a cost-of living crisis that sparked protests, but quickly reinstated it as inflation spiked. Another step to ending it was taken in early September when the cap on gasoline was eased — though the price remains below the market level.
Dangote, who has the option of either exporting his fuel or selling it domestically, said the decision on subsidies was the government’s, but added that ending gasoline imports will have a huge upside in easing currency pressures.
The naira has lost around 70% of its value against the dollar since rules that pegged the currency at an artificially high level were relaxed last year. But the scarcity of the greenback in the Nigerian foreign exchange market continues to weigh on the naira, and is made worse by the need to pay for imported gasoline in dollars.
“Petroleum products consume about 40% 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.”
“It should reduce demand for dollars,” said Cheta Nwanze, partner at Lagos-based research firm SBM Intelligence. “Nigeria’s largest import bill for 2023 was mineral fuels, oils & distillation products. If Dangote can help cut that in half then that’s significant.” (BusinessDay)
