>SELDOM HAS one tycoon so tantalised a nation. On September 3rd Aliko Dangote, one of Africa’s richest men, announced that his new $20bn refinery in Nigeria was starting, after many delays, to produce petrol. Nigerians are now frantically debating whether that will ease chronic fuel shortages and help pull the country of 230m people out of a destabilising economic crisis.
>Once it reaches full capacity, the refinery will be big enough to supply all the petrol Nigeria needs. Yet how much that will help Nigerians depends on politics. To make a profit, Mr Dangote must be allowed to charge a fair price for his fuel. Yet for decades the government has decreed that petrol be sold at artificially low prices.
>This policy is typical of a state which is simultaneously too big, in that it asserts control of countless things best left alone, and too small, in that it fails to supply basic services. If Mr Dangote is allowed to charge market prices for his petrol, that could remove government control over a thing best left alone while freeing up funds for services such as health care and education.
>Cheap petrol is financed by a subsidy so vast that it squeezes all other public spending. The subsidy is not paid directly. Instead, the state-owned Nigerian National Petroleum Corporation (NNPC) swaps crude oil pumped in Nigeria for petrol refined abroad, then sells that petrol to the public at a big loss. That loss is deducted from the oil royalties the corporation is supposed to remit to the treasury. The system is corrupt and leaky: much of the cheap petrol is snaffled and smuggled abroad, though how much no one knows.
>Last year Bola Tinubu, Nigeria’s president, announced that he had scrapped the subsidy. Yet it has swiftly crept back. This year Escap, a consultancy, expects it to gobble up around 5.4trn naira ($3.3bn). That is 2.3% of GDP, four times the health budget and nearly half the oil revenues on which the state depends (see chart).
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>SELDOM HAS one tycoon so tantalised a nation. On September 3rd Aliko Dangote, one of Africa’s richest men, announced that his new $20bn refinery in Nigeria was starting, after many delays, to produce petrol. Nigerians are now frantically debating whether that will ease chronic fuel shortages and help pull the country of 230m people out of a destabilising economic crisis.
>Once it reaches full capacity, the refinery will be big enough to supply all the petrol Nigeria needs. Yet how much that will help Nigerians depends on politics. To make a profit, Mr Dangote must be allowed to charge a fair price for his fuel. Yet for decades the government has decreed that petrol be sold at artificially low prices.
>This policy is typical of a state which is simultaneously too big, in that it asserts control of countless things best left alone, and too small, in that it fails to supply basic services. If Mr Dangote is allowed to charge market prices for his petrol, that could remove government control over a thing best left alone while freeing up funds for services such as health care and education.
>Cheap petrol is financed by a subsidy so vast that it squeezes all other public spending. The subsidy is not paid directly. Instead, the state-owned Nigerian National Petroleum Corporation (NNPC) swaps crude oil pumped in Nigeria for petrol refined abroad, then sells that petrol to the public at a big loss. That loss is deducted from the oil royalties the corporation is supposed to remit to the treasury. The system is corrupt and leaky: much of the cheap petrol is snaffled and smuggled abroad, though how much no one knows.
>Last year Bola Tinubu, Nigeria’s president, announced that he had scrapped the subsidy. Yet it has swiftly crept back. This year Escap, a consultancy, expects it to gobble up around 5.4trn naira ($3.3bn). That is 2.3% of GDP, four times the health budget and nearly half the oil revenues on which the state depends (see chart).
!ping AFRICA&COMMODITIES