Alhaji Aliko Dangote, Africa’s most prominent industrialist and Chairman of the Dangote Group, has voiced optimism regarding a potential decrease in Nigeria’s inflation rates as the cost of diesel experiences a significant reduction.
Dangote made these comments during an Eid-el-Fitr homage visit to President Bola Tinubu’s residence in Lagos, where he addressed journalists and shared insights on Nigeria’s current economic situation.
Dangote highlighted a pivotal development: the Dangote Petroleum Refinery’s decision to slash the price of diesel to N1,200 per liter, marking a considerable decline from the previous market rate ranging between N1,650 and N1,700 per liter. This move, Dangote explained, is attributable to enhanced operational efficiency and meticulous cost management practices within the refinery’s operations.
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The reduction in diesel prices isn’t an isolated occurrence, as Dangote also noted a broader positive trend in the Nigerian economy: the appreciation of the Naira against the dollar. He pointed out the significant improvement in the exchange rate, which has transitioned from approximately N1,900 to the dollar to a range between N1,250 and N1,300.
This convergence of factors—lower diesel prices and a strengthened Naira—has translated into reduced operational costs for businesses across various sectors, particularly those heavily reliant on diesel fuel for transportation and operations.
The high cost of diesel significantly contributes to inflation, primarily because it drives up transportation expenses for goods and services.
Dangote further noted the ripple effects of lower diesel prices on the prices of locally-produced goods, such as flour. With decreased transportation costs, businesses can pass on savings to consumers, leading to a gradual decline in the prices of essential commodities. This downward pressure on prices directly contributes to curbing inflationary trends within the economy, as consumers benefit from increased purchasing power and reduced cost burdens.
His statement: “I discussed a lot of things that are ongoing, which I believe that we are on the right track. I believe Nigerians have been patient and I also believe that a lot of goodies will now come through.
“There’s quite a lot of improvement because if you look at it, one of the major issues that we’ve had was the Naira devaluation that has gone very aggressively up to about N1,900. But right now we’re back to almost N1,250, N1,300, which is a good reprieve.
“You can see quite a lot of things have actually gone. Even people now when you go to the market, for example, something that we produce locally like flour or whatever, people will charge you more.
“Why? Because they’re paying very high prices on diesel and what we did, for example, in our refinery, we started selling diesel at about N1,200 for N1,650 and I’m sure as we go along, things will continue to improve quite a lot.
“Well, even now it’s a lot of impact. If you look at it now, when you are buying N1,650, N1,700 for a liter of diesel, and that one has been cut off by almost one-third to now be paying for diesel at N1,200.
“And maybe eventually going forward, even though the crude prices are going up, even with that, I believe people will not get it much higher than what it is today, N1,200.
“It might be even a little bit lower but it can help quite a lot because if you are transporting locally produced goods, rice, and other stuff, you are paying N1,650.
“Now you are paying two-thirds of that amount, N1,200. It’s a lot. It’s a lot of difference. People don’t know.
“That can actually help to bring inflation down immediately. And I’m sure when the inflation figures are out for the next month, you see that there’s quite a lot of improvement in the inflation rate.
“So one step at a time. And I’m sure the government is working around the clock to make sure that things get much better.
“Because it’s in their own interest. It’s in the interest of everybody, it’s in our own interest and I just want to thank everybody for the Nigerians to get things better.”
However, amidst these optimistic developments, Dangote acknowledged the need for continued vigilance and proactive measures to sustain the momentum of economic recovery. He highlighted ongoing discussions and collaborations between industry stakeholders, government agencies, and private enterprises aimed at fostering a conducive business environment and driving sustainable growth.
Oil Marketers Call for Further Reduction in Diesel Prices
In line with Dangote’s message that lower diesel costs will reduce inflation, oil marketers have called for additional measures to further alleviate the financial burden on businesses and consumers.
The Independent Petroleum Marketers Association of Nigeria (IPMAN) and other industry stakeholders are advocating for a downward revision of the pump price of diesel produced by the Dangote Petroleum Refinery to between N700 and N850/liter.
The current price of N1,225 per liter, as set by the refinery, is deemed relatively high by industry players, considering the absence of import costs associated with domestically produced diesel. Marketers contend that a reduction in diesel prices would not only bolster competitiveness within the sector but also stimulate economic activity by reducing operational costs for businesses across various industries.
The Federal Government’s intervention has been solicited to facilitate constructive dialogue between oil marketers and refinery managers, with the aim of reaching a consensus on fair and sustainable pricing mechanisms. By aligning diesel prices with market realities and addressing concerns raised by industry stakeholders, marketers believe policymakers can effectively support economic recovery efforts and foster long-term prosperity for Nigeria’s economy.
In essence, the reduction in diesel prices holds the promise of catalyzing a virtuous cycle of economic growth, wherein lower operational costs translate into reduced consumer prices, thereby mitigating inflationary pressures and enhancing overall economic stability.