Renowned economist and public affairs analyst, Dr. Samson Simon, has advised the Federal Government to reconsider the total removal of petrol subsidies, despite growing calls for such a move. Dr. Simon, who serves as the Chief Economist at Economics & Data Limited, expressed his concerns during an exclusive interview with DAILY POST, highlighting that Nigeria's current refining capacity is insufficient to support a complete subsidy removal.
His
remarks follow an interview with Aliko Dangote, Chairman of Dangote Group, on
Bloomberg TV, where the billionaire businessman advocated for the full
elimination of petrol subsidies. While Dr. Simon acknowledged that subsidy
removal theoretically makes economic sense, he stressed that Nigeria’s unique
circumstances make the move risky at this time.
The Case
for Caution in Removing Subsidies
Dr.
Simon explained that although removing subsidies could potentially free up
much-needed resources for critical sectors like education, healthcare, and
infrastructure, Nigeria's previous attempts to phase out subsidies have not
yielded the desired outcomes. He noted that despite increasing fuel prices, the
government still finds itself paying substantial sums for fuel subsidies,
signaling deeper systemic issues.
“Theoretically,
removing subsidies is the best move—it releases funds for essential areas such
as infrastructure and social services,” Simon explained. “But we've tried
removing subsidies before, and while it has caused maximum pain for Nigerians,
we still end up paying even more in subsidies. That indicates a fundamental
problem.”
Emphasizing
Domestic Refining Capacity
One
of the economist's key recommendations is to focus on improving domestic
refining capabilities before removing subsidies entirely. According to Simon,
Nigeria must ensure that local refineries can process enough petroleum to meet
domestic demand. He warned that relying on a single refinery, such as the
Dangote Refinery, would lead to a dangerous monopoly that could ultimately hurt
Nigerians.
“The
issue is not just removing subsidies, but doing so while ensuring there’s
sufficient domestic refining capacity,” he emphasized. “Relying solely on
Dangote's refinery would create a monopoly, which is a dangerous position for
the market. Dangote is a businessman, and his primary goal is profit. In a
monopolistic environment, the lack of competition could lead to higher prices.”
Risks of
Monopoly in the Petroleum Industry
Dr.
Simon further warned about the risks of allowing monopolies to dominate
Nigeria's petroleum sector. He likened the situation to the country's cement
industry, where Dangote controls over 60% of the market, leading to prices
higher than the global average. He explained that while Dangote is not the only
cement producer in Nigeria, his dominant market share effectively creates a
monopoly, resulting in higher costs for consumers.
“A
monopoly doesn’t just mean having a sole supplier; it also refers to a dominant
supplier,” he explained. “Even though there are other cement manufacturers in
Nigeria, Dangote’s dominance makes it feel like a monopoly, and that’s why
Nigerians are paying more for cement than the global average. We can't afford
to let the same happen with petroleum.”
The Need
for Competition and a Strategic Approach
Dr.
Simon called for competition within the refining sector, stressing that
domestic refining does not automatically translate to lower prices unless there
is a competitive environment. He urged the government to not only encourage
Dangote but also support other players in the oil and gas industry to create a
more balanced market.
“We
must ensure competition in the refining sector,” he said. “While Dangote should
be encouraged, it’s essential that he doesn’t become the sole player.
Otherwise, we risk all Nigerians feeling the pain of a monopolized market.”
Proposing
a Balanced Approach
In
conclusion, Dr. Simon proposed a balanced approach to addressing Nigeria’s fuel
pricing issues, suggesting that the government should focus on strategies that
lower pump prices while reducing or eliminating subsidies. He highlighted the
importance of increasing domestic refining and securing local feedstock as part
of this strategy.
“Removing
subsidies and lowering fuel prices are not mutually exclusive goals,” Simon
explained. “The ultimate aim is to achieve lower pump prices, and subsidies are
just one tool to get there. If we can develop a strategy that reduces the pump
price of fuel without paying for subsidies, that would be the ideal solution.”
He
further added, “The strategy should focus on domestic feedstock and refining,
not just for Dangote, but for the entire Nigerian oil industry. That will go a
long way in solving our fuel pricing problem.”
Final
Thoughts
Dr. Samson Simon’s cautionary stance serves as a reminder that while subsidy removal may offer economic benefits on paper, the realities on the ground in Nigeria demand a more measured approach. Ensuring domestic refining capacity, fostering competition, and avoiding monopolies are critical to achieving a stable and affordable fuel market for Nigerians.
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