By Babs Oyetoro
Economic experts yesterday warned that the new Dangote Refinery which is billed to commence refining petroleum products soon might not reduce the price of fuel even when the subsidy on Premium Motor Spirit (PMS) is removed.
The Federal Government recently suspended the removal of subsidies till further notice due to pressure from the Organised Labour comprising the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) who threatened to begin mobilization nationwide for a total shutdown of the country.
However, speaking in a workshop organized by the Major Oil Marketers Association of Nigeria (MOMAN) an economist, Dr Biodun Adedipe, hinted that what necessitated subsidy incentive was the inefficient refinery, saying that was not ideal method to fund the oil industry.
Adedipe also faulted the position held by some Nigerians that Dangote Refinery would bring succor to the oil industry and the consumers when it begins full operation, noting that there might not be much difference in terms of price of the product since the production cost may not change.
The economic guru said Dangote Refinery would run as a commercial enterprise because the funding of the project was sourced from foreign financial institutions with interest and the organization would have to pay back in foreign currency.
“Being a business organization, the price of the product will be fixed based on the cost of production and other factors will also come into play to determine the sales of their product.
“Besides, they may even decide to export their products if that will earn them more profits than selling locally except that the government decides to have a special arrangement with Dangote company.
“The only benefit to Nigeria is the easy availability of the product because the company is based here unlike when it is imported from abroad, where it will take two weeks to arrive the country”.
Giving an insight into what should be done to put an end to the subsidy regime, Adedipe said the government must ensure that inefficiency was reduced to the barest minimum.
He said, “The government must check fraud, crush the hydra-headed monster called corruption, and put an end to unsafe business practices.”
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Similarly, another economic expert, Mallam Bello Rabiu, said the suspension of the subsidy was politically motivated without considering the implication.
Rabiu noted that the government was jolted after discovering that she would need N3trn every year to make up for the subsidy removal which was not provided for in the budget.
He stressed that the government would have to continue to borrow to fund the subsidy removal adding that inconsistent in government policy always have negative effects on businesses.
Meanwhile, MOMAN chairman, Mr Olumide Adeosun, revealed that the association was seeking consultation with the Ministry of Petroleum Resources, the Nigerian Midstream and Downstream Petroleum Regulatory Authority, and other industry stakeholders to understand how the suspension of subsidy would impact the provision of Provisions in the Petroleum Industry Act as well as market operations.
