Nigerian billionaire Aliko Dangote has urged the country to permanently end its long-standing fuel subsidy, as gasoline production at his 650,000-barrel-a-day refinery near Lagos helps stabilize the nation’s currency, the naira.
In a Bloomberg Television interview with Francine Lacqua in New York on September 23, Dangote emphasized the drawbacks of the subsidy. “Subsidy is a very sensitive issue. Once you are subsidizing something, people will inflate prices, and the government ends up paying more than necessary,” he said. “It is the right time to get rid of subsidies.”
Nigeria, Africa’s largest oil producer, has relied on imported petroleum products for years. The country spent $10 billion on fuel subsidies in 2022 alone. When President Bola Tinubu took office in May 2023, he removed the subsidy in an effort to manage costs. However, widespread protests due to inflation led to its quick reinstatement. Recently, the government made another attempt to ease the subsidy by loosening the price cap on gasoline, though the price remains below market rates.
Dangote’s refinery, which began supplying gasoline to the state-owned oil company for domestic sale on September 15, has the option to either export fuel or sell it within Nigeria. He believes that cutting down on gasoline imports will ease currency pressures.
The naira has lost around 70% of its value against the U.S. dollar since currency controls were relaxed last year. A significant portion of Nigeria’s foreign exchange—about 40%—is spent on petroleum imports, which further strains the naira. According to Dangote, local fuel production can “stabilize the naira” by reducing the need to buy fuel with dollars.
Analysts support this view. Cheta Nwanze, a partner at Lagos-based research firm SBM Intelligence, noted that Nigeria’s largest import bill for 2023 was for mineral fuels, oils, and distillation products. “If Dangote can help cut that in half, then that’s significant,” Nwanze said.
Ending the fuel subsidy and increasing local production could ultimately strengthen Nigeria’s economy and reduce its reliance on foreign exchange for fuel imports.
