Market News

By Nduka Orjinmo

Once again, Nigeria is trying to end its costly addiction to fuel subsidies. This time, it might get a helping hand from a billionaire.

President Bola Tinubu declared the support gone in May 2023, but backtracked months later as a surge in inflation ignited cost-of-living protests.

Capping the gasoline pump price since August 2023 has left a massive hole in the state-owned oil company’s financials. This week, it said debts to oil traders were affecting its ability to source fuel as miles-long lines formed at filling stations.

Something had to give, and it came in the form of a 45% increase in prices. That’s likely to spark inflation again after the run to a multi-decade high receded in July for the first time in almost two years.

Transport costs have already jumped by 50% in some parts of country. Chances of relief through interest rate cuts may have evaporated.

There may be a way out, though.

Tycoon Aliko Dangote’s 650,000 barrel-a-day refinery near the commercial capital, Lagos, is producing gasoline after a long runup, and will be allowed to sell at market prices. That offers the government a window to end the budget-busting subsidy and transform the economy.

Until now, Africa’s largest oil producer has imported all of its gasoline.

Building the giant facility was a major undertaking and gamble, even for the sprawling Dangote business empire. While politicians initially praised the vision, it came under fire as the company sought to navigate myriad domestic oil-supply contracts. Dangote’s offices were raided in a corruption probe.

Tinubu will have to act quickly — there’s a high risk of a return to the upheaval that brought parts of the continent’s most-populous nation to a standstill in early August and led to the death of at least 21 people. Labor unions have called meetings for the coming days to discuss fuel costs.

Protesters were already preparing for more demonstrations in October.

Rollout from the Dangote refinery should ease public strain and may well mend any lingering tensions between the president and his nation’s richest person.