Nigeria not ripe for total subsidy removal – Economist warns against monopoly

An economist and public affairs analyst, Dr Samson Simon has urged the Federal Government not to heed advice for the total removal of subsidy on petrol.

Simon, who is the Chief Economist, Economics & Data Limited was reacting to the interview granted Bloomberg Tv by the Chairman of Dangote Group, Aliko Dangote, wherein he urged the government to completely remove subsidy.

He, however, said it was not the right thing to do at the moment considering that the country does not have sufficient local refining capacity.

Speaking to Newspot in an exclusive interview, he observed that “theoretically, on paper, removal of subsidy is the best thing, it frees up resources to attend to more critical needs of the state, such as education, healthcare, infrastructure.

“But we have tried to remove subsidy and we have failed woefully, and while we have inflicted maximum pains on Nigerians by hiking the pump price of fuel, we are still even paying more for subsidy, that means there is a problem somewhere.

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“I think what we are not getting right is that we need to ensure domestic refining, and then domestic supply of feedstock to these refineries, by the way it should not be limited to Dangote, because Dangote is a businessman, he is after profit and when he is a monopolist, he is even more dangerous.”

The economist also cautioned against allowing monopoly to thrive in the market, warning that Nigerians would suffer for it.

“There should be a competition. We have been a net exporter of cement for a while now and it has not really been a blessing in the sense that those people that are manufacturing cement charge more than the global average.

“So, domestic refining does not necessarily translate to lower prices; there is a need for us to ensure competition.

“Even for cement, I know that Dangote is not the sole-manufacturer of cement but he controls more than 60 percent of the market. One of things defining monopoly is not necessarily having a sole supplier, but a dominant supplier, it is still a monopoly and that is why we are all feeling the pains.

“In the same manner, I don’t think this is the right time. Yes, Dangote should be encouraged, but we may still suffer enough if we allow him to be the sole person now, all of us are going to feel the pain of it.”

He added that, “while we try to remove subsidy, we have to look for ways to bring down the pump price of fuel, they are not mutually exclusive, in the sense that we can still remove subsidy, it is just a means to an end, you are not requesting for subsidy for the sake of subsidy, but so that you have a lower pump price.

“So, if there is a strategy to bring down the pump price of fuel, while not paying for subsidy, I think that will be excellent, there is nothing that will be better than that

“And the strategy I have in mind is domestic feedstock and domestic refining, not only for Dangote but for the general oil industry in Nigeria. That will go a long way in helping fix the problem.”