UNLOCKING THE FULL POTENTIAL

OLAKUNLE AKINMOSA argues why Dangote’s ‘thank-you’ to Tinubu matters

On Monday, September, 14, when Africa’s richest man, Aliko Dangote, publicly thanked President Bola Ahmed Tinubu for removing fuel subsidy and reforming Nigeria’s foreign exchange system, it was tempting to dismiss the gesture as the predictable appreciation of a businessman whose interests have benefited from the policies.

That would, however, be too simplistic. The businessman commended Tinubu’s leadership and said the Dangote Refinery was supporting the administration’s efforts. “I want to thank him for taking a lot of bold steps by removing the subsidy and democratising the exchange rate,” Dangote said on the floor of the Nigerian Stock Exchange.

“So, we thank you very much for your leadership and we will continue to partner with the government to ensure that we make this country great and we make Africa great.”

Dangote’s comments deserve to be examined beyond Dangote himself. They raise a much bigger question. Can painful economic reforms that initially hurt ordinary Nigerians eventually create a stronger economy in which both businesses and citizens are better off? My objective answer is yes. They can, provided the reforms are sustained, properly implemented and eventually translated into a more productive economy. Dangote Refinery is expected to become Africa’s biggest initial public offering, with the company seeking to raise about N2.15 trillion from investors. That timing is significant.

The Dangote Refinery is arguably one of the clearest physical manifestations of the kind of economy Nigeria has been trying to build for decades. An economy that produces more of what it consumes instead of perpetually importing finished products. But the refinery did not emerge in a vacuum. For decades, Nigeria’s political class knew that petrol subsidy was unsustainable.

Yet successive administrations struggled to remove it. Fuel subsidies became institutionalised in the 1970s, following the global oil shock, and every attempt to reform the system subsequently was hugely resisted. In January 2012, the Goodluck Jonathan administration attempted to remove the subsidy. Nigerians protested massively. The government eventually retreated and restored part of the subsidy. The Buhari administration later made further attempts to adjust petrol pricing. But the fundamental problem remained. Nigeria was effectively using scarce public resources to keep the price of petrol artificially low while simultaneously struggling to meet basic responsibilities of government.

The World Bank estimated that petrol subsidies cost Nigeria about N4 trillion in 2022 but the subsidy was not for the poor. It was just the price of pretending nothing was wrong. Tinubu’s decision to end the subsidy on his inauguration day in May 2023 was therefore economically and politically audacious.

The immediate consequences were brutal. Petrol prices jumped. Transportation costs rose. Businesses faced higher operating expenses. Food prices increased. Millions of Nigerians experienced a drastic deterioration in purchasing power. Truth be told, the increase in fuel prices following subsidy removal pushed millions more Nigerians into poverty. Anyone pretending otherwise is not being honest. But there is another uncomfortable truth. It was the fact that a reform is painful does not automatically make the reform wrong.

The same argument applies to the naira, as Dangote pointed out. The foreign exchange reform tells a similar story. For years, Nigeria operated with multiple exchange-rate windows. Different people and institutions could access dollars at significantly different rates. Such a system creates opportunities for arbitrage and makes it difficult for people to know the genuine cost of foreign exchange (FOREX). The World Bank had warned in 2023 that the gap between Nigeria’s official and parallel exchange rates had widened substantially, illustrating the distortion in the system. The CBN subsequently moved toward a more unified, market-driven foreign exchange system.

Again, the immediate result was painful. The naira depreciated sharply. Imported goods became more expensive just as businesses dealing with dollars screamed and howled. Ordinary Nigerians felt the effect through food, medicine, transportation, school fees and virtually every other part of daily life. But there is a difference between discovering the true price of something and pretending that the price does not exist. The cost of dollar we used was an illusion that could not be perpetually be sustained via subsidy.

And this is where Dangote becomes relevant. Dangote’s businesses are not ordinary businesses. They are enormous industrial enterprises requiring massive capital, long-term planning, imported machinery, foreign exchange and confidence that Nigeria’s economic rules will not suddenly make investments impossible. The refinery itself, estimated at about $20 billion and now operating at a capacity of 700,000 barrels per day, is a remarkable example.

Why does this matter to the ordinary Nigerian? Because industrialisation works through chains and spirals down ladders. A refinery needs engineers. Engineers need housing, transportation and food. It needs maintenance companies that employ workers. It needs logistics providers, banks, insurers, technology companies, security companies and thousands of suppliers. Already, the Lekki axis which it occupies has created a ‘new Lagos’. That is how the benefits of big business eventually move beyond the billionaire who owns the business. And this is the central point that is often lost in our political arguments.

That is how countries become prosperous. Nigeria’s economic history has been dominated by distribution. The government must ensure that the savings and additional revenues generated by reforms translate into visible public benefits. And that is why Dangote’s praise of Tinubu should not be interpreted simply as a billionaire thanking a president. It should provoke a bigger conversation about what kind of Nigerian economy we want.

There is an economic difference between making everybody comfortable today by borrowing tomorrow and accepting difficult adjustments today to create a more productive tomorrow. Nigeria spent years choosing the former. Tinubu has chosen the latter. Whether history ultimately judges that decision as courageous reform or expensive disruption will depend on what happens next. If ordinary Nigerians remain permanently poorer while a handful of businesses become richer, the reform will have failed its most important test. But if the reforms create a more stable macroeconomic environment, attract investment, increase domestic production, strengthen exports and expand employment, then today’s pain could eventually become the price Nigeria paid to escape a much deeper economic trap. That is the real promise of Tinubu’s reforms.

And perhaps the most important lesson from Dangote’s intervention is that a government does not create prosperity by keeping prices artificially low forever. It creates prosperity by building an economy in which Nigerians can earn enough to afford the real prices of goods and services. Undoubtedly, that is a much harder task. But it is also the only sustainable one.

For Dangote, the reforms may create room to build bigger businesses. For millions of ordinary Nigerians, the ultimate prize should be much bigger. It should be an economy in which they do not need subsidies to survive because they have productive jobs, better incomes, affordable locally produced goods and a government capable of investing in the foundations of prosperity. That is the long game. And Nigeria desperately needs to start winning it.

Akinmosa writes from Lagos