Nigeria Not Ready for Total Fuel Subsidy Removal, Economist Warns of Monopoly Threat

In a recent analysis, Dr. Samson Simon, Chief Economist at Economics & Data Limited, has urged the Nigerian government to reconsider any plans for the complete removal of petrol subsidies. His remarks were in response to an interview given by Aliko Dangote, Chairman of Dangote Group, who advocated for the total elimination of fuel subsidies during a conversation with Bloomberg TV.

While Simon acknowledged that, in theory, removing subsidies could free up resources for other critical sectors such as education, healthcare, and infrastructure, he warned that Nigeria is not prepared for such a move. In an exclusive interview with DAILY POST, the economist argued that the country lacks adequate local refining capacity to support a subsidy-free system.

“Theoretically, the removal of subsidies is beneficial as it reallocates resources to more urgent needs. However, Nigeria has attempted this before and failed, inflicting significant economic pain on citizens without achieving meaningful reductions in subsidy payments,” Simon explained.

He stressed that the key issue lies in ensuring robust domestic refining capabilities before any full subsidy removal. Simon cautioned against Dangote’s potential monopoly in the oil refining sector, given his control over the market. “Dangote is a businessman, and while his refinery is a positive development, allowing him to dominate could lead to further suffering for Nigerians,” Simon said.

Drawing parallels to the cement industry, where Dangote controls over 60% of the market, Simon noted that monopolistic practices in the fuel sector could prevent any real price reductions for consumers. “Domestic refining doesn’t automatically mean lower prices. Without competition, prices may remain high, as we’ve seen with cement.”

Simon advised the government to encourage more players in the oil refining industry to prevent Dangote from becoming the sole provider of refined petroleum products. He stressed that competition is critical to ensuring fair pricing and protecting consumers from monopolistic practices.

While Simon supports the eventual removal of subsidies, he highlighted the importance of a strategic approach that combines subsidy elimination with efforts to lower fuel prices. “The goal isn’t to maintain subsidies but to reduce the pump price of fuel. We should focus on strategies like boosting domestic feedstock and refining, across the entire oil industry, not just with Dangote.”

According to Simon, only when these measures are in place can Nigeria successfully remove fuel subsidies without further harming its citizens.