Subsidy Removal Made Dangote Refinery Possible, Says FG
The Federal Government has said the Dangote Petroleum Refinery would not have been able to commence operations under the petrol subsidy regime, arguing that the removal of the subsidy was necessary to create a viable market for private refining investment.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, disclosed this on Wednesday in Abuja while presenting the government’s “Nigeria’s Reform Scorecard: The Benefits, Costs and Harms Prevented.”
Oyedele said the removal of the petrol subsidy and the unification of the foreign exchange market had come with high costs for Nigerians but argued that the reforms had also prevented a much worse economic crisis and created the conditions for investments such as the Dangote refinery to operate.
He specifically linked the survival of the Dangote refinery to the removal of the subsidy, saying the plant could not have been commercially viable if petrol had remained at the heavily subsidised price of less than N200 per litre.
“Remember, we’re importing refined products. That is to say the Dangote refinery wouldn’t have been able to start because you can’t sell at N200 per litre and queue up for the government to pay the balance of over N1,000 per litre,” Oyedele said.
He said keeping petrol at about N200 per litre would not have meant that Nigerians would continue to enjoy cheap and readily available fuel. Rather, he argued, the country would have faced a situation where petrol remained officially cheap but became increasingly unavailable, with consumers forced to source the product from the black market at about N3,000 a litre.
“What I will say is what the counterfactual shows. On the pre-reform path, petrol would likely be simultaneously unavailable. It would still be N185 per litre. It would not be available at the official price and is likely to be trading in the black market for at least N3,000 per litre,” he said.
Oyedele said such a situation would have made it difficult for the Dangote refinery to compete with subsidised imported petrol.
He explained that under the old arrangement, a refinery producing petrol at its actual cost would have had to sell the product at a price substantially above the government-controlled pump price, while waiting for the government to absorb the difference.
He said, “The same government was already spending nearly 100 per cent of its revenue just to service debts and print a lot of money. Just imagine what could have been.”
The minister said the subsidy regime had become increasingly difficult to sustain because the government was already under severe fiscal pressure, while foreign exchange shortages were making it difficult to finance the importation of petroleum products.
He said, “With the naira simply unavailable at any official rate for most Nigerians and businesses, we were running out of dollars. Our net external reserves were about $3bn, while we were owing over $7bn.
“That is bankruptcy. And you know we can’t print dollars because we’re not the United States of America. What that means is, even to buy fuel, Nigerians would have been paying over N3,000 to buy a litre.
“There would have been scarcity everywhere. Remember, we’re importing petroleum products. The marketers would not have been able to sustain imports because you cannot sell at N200 per litre and queue up for the government to pay the balance of over N1,000 per litre.”
According to Reports, petrol was trading around N500 when the Dangote refinery commenced petrol sales in September 2024. Though the fuel subsidy was removed in May 2023, the Federal Government told the Nigerian National Petroleum Company Limited to import petrol and sell it below cost.
However, as the Dangote refinery started petrol production, the government removed the implicit subsidy, raising pump prices above N1,000.
The minister said the reforms had generated N15.8tn in resources for the federation between June 2023 and December 2025, with N5.4tn accruing to the Federal Government, N6.5tn to the states and N3.9tn shared among the 774 local governments.
He explained that the savings did not appear in the Federation Account under a line item labelled “subsidy savings”. Instead, the impact was reflected in increased naira collections from oil and non-oil revenues following the exchange rate adjustment and the removal of the implicit subsidy on foreign exchange.
Oyedele said the Federal Government also generated N3.1tn in incremental independent revenue during the period, principally through remittances and surpluses from government-owned entities.
It additionally borrowed N11.9tn between June 2023 and December 2025, taking its incremental resources from the three sources to N20.4tn. He said the borrowing would have been significantly higher and economically destabilising without the fiscal space created by the reforms.
The minister, however, acknowledged that the reforms had imposed substantial costs on Nigerians. He said petrol prices had risen from about N185 per litre before the reforms to between N1,100 and N1,400 per litre, while the Monetary Policy Rate had increased from 18.5 per cent to 26.5 per cent.
“We record that plainly as the cost of stabilisation, not a hidden win. Petrol at the pump has risen from roughly N185 a litre to between N1,100 and N1,400. That is a major, felt cost, and I will not stand here and tell you otherwise,” Oyedele said. “A scorecard that only lists wins is not a scorecard. It’s a campaign leaflet, and we did not come here to give you one,” he said.
The minister said the removal of the petrol subsidy was one of President Bola Tinubu’s first major economic decisions after assuming office on May 29, 2023. Tinubu declared during his inauguration that “subsidy is gone,” triggering an immediate increase in petrol prices and setting off a sharp rise in transportation and living costs.
Oyedele stressed that the reform was not introduced primarily to raise revenue, saying wage adjustments at N9.39tn outstripped the Federal Government’s entire savings from subsidy removal.
The minister said the Federal Government spent N30.64tn on incremental expenditure between June 2023 and December 2025. Of the amount, N9.39tn went to wage adjustments, minimum wage increases and allowances for public servants, while N9.37tn was spent on external debt servicing.
The minister said the country had previously been operating multiple exchange rates, creating opportunities for arbitrage and rent-seeking while draining foreign exchange reserves.
Oyedele noted that the official exchange rate premium over the parallel market, which had been above 60 per cent before the reforms, was now below five per cent. Without the reforms, he said the government’s estimate suggested the premium could have exceeded 150 per cent.
He said Nigeria’s net external reserves had also risen from less than $3bn to $34.8bn, while gross reserves stood at $52.5bn. Oyedele warned that under the pre-reform trajectory, Nigeria could have run out of foreign exchange needed to import essential products, including refined petroleum products. “I know we can’t print dollars because we’re not the United States of America,” he said.
Turning specifically to the impact on Nigerians, Oyedele said the government was not claiming that households had not suffered from higher prices. He said food inflation remained an area of concern, even though it had fallen from 24.82 per cent to 17.52 per cent as of June 2026, with the latest July figures showing a further decline.
“Poverty and household welfare recovery is still classified in our own scorecard as unfinished business, not a victory lap,” he said.
Oyedele insisted that the alternative to the reforms would have been worse. “On the pre-reform path, petrol would likely be simultaneously unavailable. It would still be officially priced at N185 per litre, but it would not be available at that price,” he said. “And it is likely to be trading on the black market for at least N3,000 per litre.”