Dangote Urges the Government to Eliminate Expensive Fuel Subsidies
Aliko Dangote, President and Chief Executive of Dangote Group, has called on the Federal Government to completely eliminate fuel subsidies following the start of petrol lifting from the Dangote Refinery.
Petrol prices have risen to ₦950 per litre in Lagos and over ₦1000 in the north. In a 26-minute interview with Bloomberg Television in New York, he emphasized that ending subsidies, which have cost the country trillions of naira, is timely and necessary to accurately assess national fuel consumption.
Dangote noted that production from his refinery would alleviate pressure on the naira and confirmed ownership of two oil blocks in the upstream sector, with production expected to begin next month.
He stated, “Subsidy is a very sensitive issue. When subsidies are in place, prices can be inflated, leading the government to pay more than necessary. It’s time to remove them.”
He added that the refinery would clarify Nigeria’s actual fuel consumption, as estimates vary widely.
By tracking trucks and ships that load from the refinery, he believes the government can save significantly.
Regarding the impact of subsidies on his refinery, he said, “We can either produce for local sales or export.
As a large private company, we need to ensure profitability, especially after investing $20 billion.”
The removal of subsidies is entirely the government’s decision. We can’t control prices, but the government will likely have to negotiate concessions. Ultimately, I believe the subsidy will be eliminated.
Before the Dangote Refinery started operations, Nigeria relied on imports for all its petrol.
President Bola Tinubu eliminated the subsidy when he took office in May 2023, leading to an inflation rate hike to about 34% in 2024 before declining to approximately 32.15% in August. Food inflation remains high at around 40%.
Since last year’s relaxation of currency controls, the naira has depreciated about 70% against the dollar.
Dangote noted that petroleum products account for roughly 40% of Nigeria’s foreign exchange and stated that fuel from his refinery, which began supplying gasoline to the state-owned oil company on September 15, could help stabilize the naira.
He also explained a pricing dispute with the Nigerian National Petroleum Company Limited (NNPC). NNPC purchased fuel from the refinery at a lower price than its imported stock but announced a uniform selling price for all products.
“There wasn’t really a disagreement. NNPC bought from us at international prices on September 15, while also importing about 800,000 metric tons of gasoline. Our price is cheaper than the imported fuel.
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“The announced price seemed inaccurate; it probably reflects their total costs, including profits and expenses. Their imports cost about 15% more than ours.
Ideally, they should sell at a combined price, or if they want to remove the subsidy, they could announce that change for everyone to adjust accordingly.”
Dangote announced that discussions are ongoing, and a detailed agreement on the planned crude oil sales is expected to be finalized this week, with sales anticipated to begin in October.
“We will sell the crude in naira after purchasing it in naira. We are currently coordinating with the committee to set the exchange rate.
The pricing will be based on the market rate; for instance, if crude is $80, we will pay that price at an agreed exchange rate.
“We will also sell in the domestic market, which will alleviate 40 percent of the pressure on the naira, as petroleum products account for about 40 percent of foreign exchange demand.
By reducing this demand, we can stabilize the naira, and even with subsidies, the government will know the actual costs.
“The deal aims to fulfill government expectations and create a win-win situation for all, benefiting the country.
“Discussions are still underway to finalize the agreement details, focusing on a mutually beneficial arrangement with NNPCL.
“The agreement is comprehensive. It will provide energy security, with 12 million barrels of crude scheduled for delivery in October, averaging about 390,000 barrels per day, which will be used for gasoline, diesel, and aviation fuel.”
