Rotimi Matthew: 15% Tariff – Why the Federal Government memo will get the whole lot improper

Introduction

In a move that has sparked fierce debate across Nigeria’s energy sector, the federal government proposed a 15% tariff on imported gasoline, claiming it will ensure “energy security” and proprietary rights for the Dangote Refinery. However, critics like public policy analyst Rotimi Matthew argue that this policy could backfire catastrophically, exacerbating economic strain and undermining energy accessibility. This article dissects the rationale behind the tariff, exposes its potential pitfalls, and explores alternatives that could better serve Nigeria’s public interest.

Analysis

1. The Government’s Rationale: A Fictitious “Energy Security” Narrative

The government frames the tariff as a shield against reliance on foreign fuel, but Nigeria’s energy security hinges on diversification and infrastructure—not protectionism. The Dangote Refinery, currently producing less than half of the nation’s 66 million-liter daily gasoline demand, remains vulnerable to technical and logistical challenges. Taxing imports removes the critical redundancy that ensures fuel supply during Dangote’s downtime. This approach mirrors historical blunders, such as apartheid-era South Africa’s self-sufficiency myths, which collapsed under pressure.

2. Economic Realities: Why Local Production Can’t Compete

Dangote’s refinery, despite its $20 billion scale, faces inefficiencies that imports bypass. By undercutting Dangote’s pricing, foreign suppliers expose gaps in domestic production capacity. Imposing tariffs to shield a struggling enterprise from market competition is akin to banning medicine to protect a failing pharmaceutical giant. Global energy leaders, like Saudi Aramco, thrive by embracing competition rather than stifling it.

3. The False Promise of Affordability

A 15% tariff will spike prices immediately. Calculations show a ₦95–₦100 per liter increase at the pump, which, after distribution and markup, could push gasoline prices to ₦140–₦165 per liter. This isn’t “affordability”—it’s a regressive tax that will drain household incomes, stifle public transport, and cripple industries reliant on fuel. The policy echoes Sudan’s ill-fated 2016 gas deregulation, which triggered 2019 riots after prices tripled overnight.

4. A Policy Racket: Cronyism Over Public Interest

Twenty entrepreneurs already mark up Dangote’s gasoline by ₦100–₦120, eliminating any pretense of fair competition. The government’s endorsement of this asymmetry reeks of legislative capture—a term rooted in James G. Walker’s structural economic theory, where policies favor private elites over broader societal welfare. The hypocrisy is stark: imports are deemed unpatriotic unless Dangote imports its own raw materials.

Summary

The proposed 15% tariff on gasoline imports is a flawed strategy that prioritizes cronyism over pragmatism. By taxing imports to protect an underperforming refinery, the federal government risks deepening Nigeria’s economic woes, including inflation, reduced mobility, and business failures. A holistic approach—upgrading infrastructure, diversifying suppliers, and dismantling monopolies—would better align policy with public need.

Key Points

Practical Advice

For Policymakers

• Invest in infrastructure: Upgrade roads and power grids to support refinery efficiency.
• Streamline competition: Enforce anti-monopoly laws to prevent Dangote’s dominance.
• Diversify supply: Partner with global refineries to secure affordable imports.

For Consumers

• Advocate publicly: Mobilize against policies that disproportionately affect livelihoods.
• Adopt alternatives: Explore solar-powered commuting or electric vehicles to mitigate fuel costs.

Points of Caution

Short-Term vs. Long-Term Impacts

While the tariff may temporarily shield local businesses, it risks appointing systemic incentives to curb competition. Historical parallels, such as Brazil’s 2010 ethanol tax, show how protectionism often fuels corruption and stifles innovation.

Institutional Risks

The government’s unchecked power to dictate energy prices raises constitutional concerns about overreach. Nigeria’s 1999 Constitution vests energy regulation in a complex web of agencies, requiring legislative consensus, not unilateral decrees.

Comparison

Global Precedents

• Kenya: Boosted local ethanol production via subsidies, not tariffs, to cut reliance on petrol. Result: 50% self-sufficiency in beer and fuel sectors.
• India: Reduced taxes on solar imports in 2019 to spur renewable adoption. The policy attracted $25 billion in clean energy investment.

Nigeria’s Contrasting Approach

By penalizing imports rather than incentivizing efficiency, Nigeria diverges from successful models. The Dangote Refinery’s success hinges on partnerships, not isolation—contrary to Argentina’s disastrous 2019 corn tariffs, which inflated food prices and sparked unrest.

Legal Implications

The tariff’s legality hinges on Nigeria’s Economic and Financial Crimes Commission (EFCC) mandate to regulate monopolies. Critics argue the policy bypasses the National Assembly’s role in fiscal legislation, risking procedural invalidation. A constitutional challenge akin to the 2015 Supreme Court annulment of the Rivers State fuel levy could bar the tariff if deemed economically predatory.

Conclusion

Rotimi Matthew’s warnings are unequivocal: a 15% tariff on gasoline imports will harm Nigeria’s economy, consumers, and energy resilience. True progress demands policies that foster competition, transparency, and accountability—not cronyism veiled as patriotism. The choice is clear: protect the public or protect profit.

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