Economist Urges Caution on Fuel Subsidy Removal Amid Refining Challenges

 

Dr. Samson Simon, an economist and public affairs analyst, has advised the Nigerian Federal Government against fully removing the petrol subsidy. His comments follow an interview with Aliko Dangote, Chairman of the Dangote Group, who suggested that the government should eliminate the subsidy altogether.

Dr. Simon, who is the Chief Economist at Economics & Data Limited, believes that now is not the right time for such a decision, especially since Nigeria lacks adequate local refining capacity. In an exclusive interview, he stated, “While removing the subsidy may seem beneficial on paper, it could lead to greater issues since we have previously attempted this and failed.”

He noted that past attempts to eliminate the subsidy have resulted in increased fuel prices for Nigerians, indicating deeper systemic problems. “We are still paying more for subsidies, which shows something is wrong,” he explained.

The economist emphasized the importance of domestic refining and the supply of feedstock to these refineries. He cautioned that relying solely on Dangote's operations could be risky, stating, “He is a businessman focused on profit, and having a monopolistic control can be harmful.”

Dr. Simon warned against allowing monopolies to dominate the market, as this could lead to higher prices and greater hardship for Nigerians. He pointed out that while Dangote is not the only cement manufacturer, his company controls over 60% of the market, illustrating how monopolistic practices can hurt consumers.

He suggested that instead of rushing to remove the subsidy, the government should develop strategies to lower fuel prices without the burden of subsidies. “We need to find a way to reduce pump prices, as removing subsidies should be a means to achieving lower costs,” he said.

To address these challenges, Dr. Simon called for a comprehensive approach to domestic refining and a more competitive market environment. He believes that encouraging multiple players in the oil industry, rather than relying solely on one company, could lead to better outcomes for consumers and the economy.