Astronomical Increase in Fuel Price Looming As Dangote Refinery champions Subsidy Removal

One of the ideas sold to Nigerians at the commencement of the $20 billion Dangote refinery was the prospect of the project lowering the awkwardly fluctuating oil prices and ending incessant scarcity of Premium Motor Spirit (PMS). But it turns out today this was merely a hoax aimed at getting the citizens to buy into a scheme that will further impoverish them.

Data from the Nigeria Bureau of Statistics (NBS) revealed that the average price of Automotive Gas Oil, also known as Diesel rose from N854.32 per litre to N1406.05 within a 12-month period. That sums up to 64.58 percent. This is despite the fact that Dangote Refinery started producing AGO and supplying marketers in April with an assurance to the public that its entrance into the market will crash the price to N1000 per litre.

Unlike PMS, the government is not paying any form of subsidies on AGO, meaning marketers are free to buy from Dangote and sell at any price. The long-term implication of that will be a further increase in the price average consumers buy AGO as the pricing will only be determined by the two major market forces in play — Dangote and the oil marketers. Dangote will make more money as will the marketers. A win for capitalism and most definitely a loss for the people.

However, the same play book is about to be used in the PMS distribution. Earlier this week, Dangote Group Chairman, Alhaji Aliko Dangote publicly declared that the government should end the subsidy being paid on petrol. In the interview with Bloomberg, Dangote said this in fact is the right time for the federal government to stop petrol subsidy.

One would think that the business tycoon offered that out of genuine concern for the country’s fiscal health but No! It is an attempt to repeat the same modus operandi that has worked for him in the AGO business, which is not enjoying any form of subsidy. Experts have predicted that if the petrol subsidy is totally removed, petrol prices may skyrocket to N1,800 per litre.

At the moment, due to NNPCL agreement with Dangote, the government sells crude oil to the refinery and buys the refined petrol at the international market price. But due to the subsidy payment arrangement, the NNPC sells the petrol to marketers at a price lower than the amount paid Dangote, shouldering the short fall. This helps Nigerians to buy at a relatively lower and affordable price.

However, this arrangement has made it commercially unappealing for the oil marketers to patronise Dangote refinery directly because the NNPCL, a major supplier, is selling cheaper than the market price. But with the subsidy payment out of the way, the NNPCL will be out of the picture. This means marketers can freely buy from Dangote — and the two major market forces will again be the ones determining petrol price like it is with AGO.

Nigerians must at all levels kick against Dangote refinery’s covert strategy to plunge them into further hardship through an unregulated price market.