Dangote confirms oil subsidy still being paid, advises FG to stop it immediately

The President and Chief Executive of Dangote Group, Aliko Dangote, has confirmed that federal government is still paying oil subsidy, and advised President Bola Tinubu to put a complete stop to it for the good of the country.

In a 26-minute interview with Bloomberg Television in New York today, September 24, Dangote said that putting a complete end to subsidy would be a win-win for his refinery and the Nigeria National Petroleum Company Limited (NNPCL).

He insisted that the time was right to end subsidies which he regretted, have gulped trillions of naira from the country’s coffers. He added that the removal would assist in determining the country’s actual consumption.

He said that fuel production from his refinery would help ease pressures on the naira and would confirm ownership of two oil blocks in the upstream sector with an expected production date of next month.

“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.”

Speaking on whether or not the federal government retaining fuel subsidy would go well with his refinery, Dangote said his refinery had a choice of either to produce and export or produce and sell locally. “But we are a big private company. And yes, it’s true, we have to make a profit. We build something worth $20 billion, 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.

“Petroleum products consume about 40 per cent of our foreign exchange,” Dangote said, adding that fuel from his refinery, which started supplying gasoline on September 15 to the state-owned oil company for domestic sale, “can actually stabilize the naira.”

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

He said that 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 were 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 both gasoline, diesel, and aviation fuel.”

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

President Tinubu had told Nigerians that his government had removed the subsidy when he took office in May 2023, the announcement that 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 has remained high at about 40 per cent.

The naira has lost about 70 per cent of its value against the dollar since rules that pegged the currency at an artificially high level were relaxed last year.