Dangote calls for complete petrol subsidy removal

Alhaji Aliko Dangote

•Mixed reactions trail request

•As PENGASSAN urges FG to increase stake in refinery to 45%

President of Dangote Group, Alhaji Aliko Dangote, has advocated for total removal of fuel subsidy, saying it is no longer sustainable.  

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

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.

Accordingto him, “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.”

Dangote said: “All countries have gotten rid of subsidy. Let me give you an example. Saudi Arabia used to give, what Saudis, the citizens, believe is that oil is our own God-given gift, so government shouldn’t charge us. So government was selling it at a low price.  

“But today, as we speak gasoline 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 neighboring countries and we have porous borders. So it is not sustainable.

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

Mixes reactions

Reacting to the call for subsidy withdrawal, Managing Director of 11 Plc, Mr Adetunji Oyebanji, said, “I am very skeptical about subsidies. But for me, by removing the subsidy on PMS, some of the money saved should be used to invest in this new energy sources.

“Government should get its hands out of everything and just be the regulator, setting the guidelines as far as quality standards are concerned. Through the Federal Competition and Consumer Protection Agency as well as making sure nobody is cheated in terms of overpricing. Government should leave the business of running refineries and distribution to the private sector because the private sector can do it much better and more efficiently than they can do it.

“To me, the number one source of our problem is too much government involvement.

“All it ends up doing is creating gate keeping opportunities, bottlenecks, where you have to go and meet somebody to get a location or whatever.    All those things are a recipe for disaster. The best thing that could solve all these problems is for government to hand it off directly, then it can be the referee in the middle blowing the whistle if anybody comes and infringes.”

Similarly, Wumi Iledare, Professor Emeritus in Petroleum Economics & Policy Executive Director, Emmanuel Egbogah Foundation, Abuja, said: “It will be a shock to the market but price will come down because exchange rate will come down and import will compete.    Open access to all marketers to load from Dangote refinery and not to NNPCL alone. The more the participants, the more the closeness to achieving optimal mutuality of interest guaranteed by market competition.”

PENGASSAN urges FG to increase stake in Dangote Refinery to 45%

On its part, the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, yesterday, urged the federal government to increase stake in Dangote Petroleum Refinery to 45 per cent, from the current 7.25 per cent.

The association said increasing its stake in the 650,000 barrels per day, bpd refinery would culminate in achieving energy security for Nigerians.

The shares of NNPC are held by the Ministry of Finance Incorporated and Ministry of Petroleum Incorporated in equal portions, on behalf of the Federal Government.

The NNPC Limited’s shares are fully Federal Government owned until private investors acquire shares in NNPC Limited.

The company originally planned to hold a 20 percent share in the Dangote Refinery. 

In July, Aliko Dangote, the Chief Executive Officer of Dangote Refinery, disclosed that the NNPC’s stake had been reduced to 7.2 percent.  

But adressing the press in Lagos, yesterday, the President of PENGASSAN, Festus Osifo of PENGASSAN, said: “The Federal Government should increase its shareholding stake in Dangote’s Refinery from the current 7% to at least 45%. This will ensure further energy assurance and security for the citizens.”

Completion of refineries

He also called on the federal government to complete the maintenance of the nation’s four refineries and scale down its shareholdings to a maximum of 49 per cent.

The association said core investors should be invited to take up the remaining 51 per cent interest in the refineries, adding that infrastructure should be put in place to enhance investment and delivery of products to consumers.

Dangote plans to invest in oil, agriculture in Dubai

In a related development, Dangote, has disclosed plans to invest in oil and agriculture in Dubai.

He said further deals with the Investment Corp. of Dubai may run into billions of dollars after the Emirati holding company invested $300 million in his cement business last month.

“We have also agreed to invest in other ventures in oil and agriculture,” Dangote said today in an interview at a conference in Dubai. “They already have a seat on our board. This could run into billions of dollars. There are a lot of opportunities that we are looking at with ICD.”

ICD is exploring opportunities to work with the Nigerian billionaire after taking an unspecified holding in  Dangote Cement Plc (DANGCEM)  last month, its first major Africa investment, ICD Chief Executive Officer Mohammed Al Shaibani also said today in Dubai. The company is diversifying its investments, which include Emirates airline and Emaar Properties PJSC.

Dangote, whose cement and commodities businesses built him a $23.1 billion fortune, according to the Bloomberg billionaires index, partnered with the private-equity firms  Blackstone Group LP (BX)  and  Carlyle Group LP (CG)  in August for Africa investments. He plans to spend about $3 billion to boost production of sugar and rice at his companies, he said today.

Dangote’s cement business, the biggest producer in Africa, has the capacity to produce 29 million tons in Nigeria and plans to expand in 13 other countries on the continent.

Gas Assets

The billionaire is bidding for gas assets in Nigeria, Africa’s largest economy, to help stem continuing disruptions to his cement plants in the West African nation. He’s also building a $9 billion oil refinery and petrochemical complex in Nigeria’s southwest that is scheduled to be completed in 2016.

“We are looking forward to doing more with Mr. Dangote, and we have some things that we are exploring at the moment,” ICD’s Al Shaibani said. “Having the right partner, especially in Africa, is the key thing.”

While Nigeria is Africa’s top oil producer, it relies on fuel imports to meet more than 70 percent of its needs. Four state refineries with a combined capacity of 445,000 barrels a day are operating at a fraction of that because of poor maintenance and aging equipment.

Dangote’s businesses offer “huge growth potential and we saw this as the right moment to come in,” Al Shaibani said.