Africa’s Richest Person, Aliko Dangote, Backs Total Fuel Subsidy Removal

•PENGASSAN wants FG to raise NNPC’s stake in 650,000 bpd refinery to 45%

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

President of Dangote Group, owners of Dangote Petroleum Refinery and Petrochemicals, Alhaji Aliko Dangote, has advocated the total removal of fuel subsidy, saying it is no longer sustainable.

The federal government had reintroduced subsidy on petrol, barely one year after President Bola Tinubu, during his inauguration speech on May 29, 2023, declared, “Subsidy is gone.”

But in an interview on Bloomberg Television in New York on Monday, Dangote said the removal of subsidy would take care of any discrepancy in consumption figures and also help government save money.

“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,” he argued.

Dangote further justified his call for subsidy removal by maintaining that countries of the world were doing away with the funding of petrol subsidy since it was not sustainable.

He stated, “All countries have got rid of subsidy. Let me give you an example. Saudi Arabia used to give what Saudis, the citizens, believe is their oil and it is their own God-given gift, so government shouldn’t charge them. So government was selling it at a low price.

“But today, as we speak gasoline (petrol) is about 40 per cent cheaper in Nigeria than Saudi Arabia, which I think doesn’t make sense.

“Number two, our price for gasoline is about 60 per cent of the price of our neighbouring countries and we have porous borders. So it is not sustainable.”

Dangote stated that Nigeria could no longer afford subsidy, but stressed that whatever decision will eventually be taken will depend on the federal government.

“The amount of subsidy we are paying, government cannot afford that kind of subsidy,” he said.

Asked if he was advocating subsidy removal to make his refinery viable, Dangote said, “We have a choice of when we produce, we can export, or when we produce, we sell locally. We are a private company. And yes, it’s true, we have to make profit.

“We built something worth $20 billion. Definitely we have to make money. The removal of petroleum subsidy is totally dependent on government, not on us. We cannot change price.

“But I think government should give up something for something; so I think at the end of the day, the subsidy will have to go.”

He said Dangote Refinery will resolve the controversy about the total daily consumption of petrol in Nigeria.

According to him, “This our refinery will bring a lot of things out there. It will show the real consumption of Nigeria because nobody can tell you. Some people say 60 million litres gasoline per day, some said it is less; but right now by us producing, everything can be counted, so everything can be accounted for.”

To ensure that, Dangote said there will be tracking devices on his trucks to ensure their movements were made transparently.

He said, “Most of the trucks and ships that will come and 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 quite a lot of money.”

Dangote last week started selling its petrol in the local market, especially to the Nigerian National Petroleum Company Limited (NNPCL) in dollars.

The refinery promised to sell to NNPCL or any other petroleum marketer in naira from next month, October 1, when it will start using the batch of crude purchased in the local currency.

Meanwhile, oil workers under the aegis of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) called on the federal government to increase its equity shareholding, through NNPCL, in the Dangote Refinery, from the existing seven to at least 45 per cent.

President of PENGASSAN, Mr. Festus Osifo, made the call yesterday in Lagos during a press conference, where he presented the communique of the recent PENGASSAN Energy and Labour Summit (PEALS 2024) in Abuja.

The summit had the theme, “The Future of Nigeria’s Oil and Gas Industry: Energy Mix, Energy Security, Artificial Intelligence, Divestment and Crude Oil Theft.”

Osifo explained that energy security was cardinal for the survival of any nation, with Nigeria not an exception; saying the citizens of Nigeria constantly demand energy affordability, accessibility and availability

Aside demanding government’s increased shareholding in the 650,000 barrels per day (bpd) refinery, Osifo advocated that the federal government should also divest its majority equity stake in the four national refineries and reduce its shares to at most 49 per cent.

He said rather than holding on to the four refineries without creating any value, core investors should be allowed to take 51 per cent shares in them and the refineries should be structured in the fashion of the Nigeria Liquefied Natural Gas Limited (NLNG).

NNPCL initially wanted to acquire 20 per cent stake in the $20 billion Lagos-based Dangote refinery, but later, a few months ago, revealed that it only bought 7.2 per cent owing to certain business considerations.

Osifo explained that the recommendations reflected the association’s push for increased local production of petroleum products

He stated, “Ramping up efforts to make the nation’s four refineries work; once operational, the government should divest majority shareholding and own at most 49 per cent of the shareholding in the four refineries. Core investors will be brought in to take the 51 per cent, as applicable in NLNG.

“The federal government should increase its shareholding stake in Dangote’s Refinery from the current seven to at least 45 per cent. This will ensure further energy assurance and security for the citizens.”

On creation of strategic petroleum product reserves, Osifo said the government should partner with players in the private sector to maintain the already available petroleum product storage in the six geopolitical zones in the country.

He said when operational, petroleum products will be stored there and only made available when there is a shortage in supply.

To achieve energy security, the PENGASSAN president said energy must be affordable.

He maintained that to ensure affordability of energy products, the government must take serious steps to stabilise the exchange rate, pointing out that the continuous slide of the naira would greatly hamper the affordability of energy in Nigeria.

He further urged the federal government to develop and strengthen the country’s oil and gas value chain to ensure a more efficient and reliable distribution system in the downstream.

Osifo warned that without such a system, the country would continue to face recurring fuel shortages. He said the country’s reliance on the truck-based distribution system was deficient and too inadequate to meet the demands of Nigerians, given its vulnerability and disruptions due to bad roads, flooding and ad-hoc logistics arrangements.

Osifo further stated that part of the recommendations of the summit was that the government should give more incentives to attract the International Oil Companies (IOCs) and the indigenous producers to invest in more crude oil production in the next five years.

He said the summit canvassed for 50 per cent of the accruable oil revenues to be dedicated to investing in renewable energy, like solar, batteries, wind, hydrogen, hydro, etc. 

As most IOCs were currently involved in developing greener energy strategies and businesses across the globe, the PENGASSAN president also advised that government must partner with the multinationals to accelerate and deepen greener energy schemes in the Nigerian market.

In the area of managing divestment in the Nigerian oil and gas industry, Osifo called for formulation of a comprehensive divestment framework under the Petroleum Industry Act (PIA) to guide asset divestment by licensees and Lessees. He said such framework should be strictly adhered to and implemented.

However, pending when the PIA was amended to include the divestment framework, Osifo suggested that the current framework promulgated by Nigerian Upstream Petroleum Regulatory Commission (NUPRC) must be gazetted for full implementation.