The next few days will be exceedingly consequential for Nigeria. First, Dangote Refinery will produce petrol, creating a new era for the nation. And Dangote Refinery will buy crude oil in Naira from the Nigerian people. Those two elements will disintermediate the use of US dollars in the Nigerian economy. I posit that 40% of “I need US dollars” will disappear as a result of these playbooks.
In short, I was to put my near-term positioning of Naira to be about N1,000/$ by Dec 2024. Unfortunately, I am unable to do that, because Dangote Refinery will not sell to INDEPENDENT operators of filling stations; the Nigerian government will be the sole buyer. That is a vector which must be compensated in the design.
With that structure, the promising optimal equilibrium shifts. Why do we need the government inserted in the process? Ideally, the more players you disintermediate, the better the pricing efficiency since every layer adds cost in the value chain. I call on the government to change its mind on this: allow Dangote to sell to the independent players, and supervise them, to ensure everyone plays by the rules.
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Good People, Nigeria is attaining Energy Federalism (not fiscal federalism) and the implications are massive. In an upcoming speech titled “Energy Federalism and Reshaping of Nigeria’s Regional Comparative Advantages”, I will explain how muting the Petroleum Equalisation Funds (PEF) and Petroleum Products Pricing Regulatory Agency (PPPRA) will reshape regions in Nigeria.
In the past, prices of petrol were uniform because governments paid to equalize prices across all parts of Nigeria. As this new era opens, that may not be the case: Tarabans may pay N1,000/litre when Lagosians are paying N850/litre on petrol. Across all indicators, OA Lawal’s lecture on the location & localization of industries in O’Level Economics will be shaped in Northern Nigeria by access to competitive energy.
So, the government has a huge decision here and that is why they want to take the call from Dangote: “Nigerian Government to Decide Price of Dangote Petrol – Dangote”. If the government allows things to fly, you have energy federalism, and that would be a massive decoupling in an asymmetric way, regionally.
Nigerian Government to Decide Price of Dangote Petrol – Dangote
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