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Dangote To FG: End Costly Fuel Subsidy Now

LAGOS: The President and Chief Executive of Dangote Group, Aliko Dangote, has urged the Federal Government to end fuel subsidies completely.

The industrialist, who spoke in a 26-minute interview with Bloomberg Television in New York on Monday, said the time is right to end subsidies which have gulped trillions of naira from the coffers of the federal government of Nigeria.

In his statement, the removal would help in knowing the country’s actual consumption of petroleum products.

In light of the recent start of petrol lifting from the Dangote Refinery and price increases to ₦950 per litre in Lagos state and its surroundings and above ₦1000 in the north, his advice is in line with these recent developments.

He revealed that he is the owner of two upstream oil blocks with a projected production date of next month. He also said that the naira will be less pressured due to petrol output from his refinery.

Subsidy is a very sensitive issue,” he stated. Subsidizing anything will cause individuals to increase the price, which will force the government to pay money that they shouldn’t have.

The moment has come for the removal of subsidies.
However, you know, this refinery will fix a lot of problems out there.

Dangote also spoke on whether or not the federal government retaining fuel subsidy would mean well for his refinery, “Well, you see, we have a choice of either one. We produce, we export, and when we produce, we sell locally. But we are a big private company. And yes, it’s true, we have to make a profit. We build something worth $20bn so definitely we have to make money

“The removal of subsidies is totally dependent on the government, not on us. We cannot change the price, but I think the government will have to give up something for something. So I think at the end of the day, this subsidy will have to go.

Nigeria had imported all petrol consumed in the country before the Dangote Refinery came onstream.

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.

“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.”

The billionaire also revealed the details of the pricing disagreement that occurred with the Nigerian National Petroleum Company Limited.

He said the national oil company bought its current stock from the refinery at a cheaper price than its imported fuel but gave a uniform price for all products.

“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.

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“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 both gasoline, diesel, and aviation fuel.

It will demonstrate Nigeria’s actual consumption, since, well, no one can tell you. 60 million liters of fuel a day, according to some individuals.

Some argue that it’s less. Nevertheless, based on what we are now creating, everything can be accounted for. Thus, everything can be tracked back, especially for the vast majority of the trucks or ships that will be loading off of us. We want to install a tracker on them to ensure that they only steal oil from within Nigeria. I believe this would help the government save a significant amount of money. I believe that the time has come to remove the subsidies.

 

 

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