In a recent interview, Aliko Dangote urged the Nigerian government to stop petrol subsidies, stressing it is no longer sustainable for the country.

Aliko Dangote, the founder of Dangote Petroleum Refinery, has called for an end to Nigeria’s petrol subsidy. In a conversation with Bloomberg TV on Monday, September 24, he explained why it’s the right time for the country to move away from such payments.

According to Dangote, “It’s time to remove the subsidy because most countries have already done so.” He believes that the subsidy system disrupts prices and forces the government to spend money unnecessarily.

He acknowledged that while removing the subsidy is a sensitive issue, the current approach leads to rising costs and puts a strain on the government’s finances. He added that his refinery would track local petrol sales to ensure accurate data on consumption.

Though Dangote made it clear that the final decision lies with the government, he highlighted that continuing to pay the subsidy is financially unsustainable and the government won’t be able to afford it much longer.

Why is the Subsidy a Problem?

Dangote pointed out that subsidies often lead to price distortions. This means that instead of paying a fair market price for fuel, the government keeps prices artificially low by paying part of the cost. Over time, this becomes a huge financial burden.

In Nigeria, the government has been spending a large amount of money on fuel subsidies for many years. While this has kept petrol prices low for consumers, it has also taken away money that could be used for other important areas, like education or healthcare.

What Happens if the Subsidy is Removed?

The removal of the subsidy would mean that the price of petrol will be determined by the market. This could lead to an initial rise in fuel prices, but it would also reduce the pressure on the government’s budget.

Dangote believes that the country cannot afford to keep paying for the subsidy in the long run. By stopping it now, Nigeria can start focusing on better financial planning and invest in areas that will benefit the economy as a whole.

He said; 

“But this refinery will bring quite a lot of issues out there. It would show the real consumption of Nigeria because nobody can tell. Some people say it is 60 million litres per day, some say it is less.

“But right now, by us producing, everything can be counted and accounted for. Most of the trucks or ships that will load from us, we will put a tracker on them to be sure they are going to take the oil within Nigeria and that can help the government to save a lot of money.

“For example, Saudis, the citizens believe that oil is our god-given gift and should not charge us for it. Government was selling it at a very low price. But today, as we speak, gasoline is about 40 percent cheaper in Nigeria than in Saudi Arabia, which I think does not make sense.

“Our price of gasoline is about 60 percent the price of our neighbouring countrries and we have porous borders, so it is not sustainable. Government cannot afford the amount of subsidies we are paying.

“We have a choice of exporting when we produce and we sell locally. We are a private company and it is true we have to make a profit. We built something worth $20 billion, and definitely we have to make money. The removal of subsidy is totally dependent on the government, not on us.

“We cannot change the price but I think the government would have to give up something for something.”

While the decision to remove the petrol subsidy may be difficult, it seems to be the best choice for Nigeria’s financial future. With Dangote’s refinery set to monitor petrol sales closely, the government would have better data on how much fuel is actually being used, which can help in planning for the future.