The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has said the petrol discount announced for Nigerian National Petroleum Company (NNPC) Retail stations does not amount to a return of fuel subsidy.
Oyedele explained in a statement on Friday that NNPC Retail would fund the discount by reducing its profit margin rather than using funds from the Federal Government’s budget or the Federation Account.
The clarification follows the government’s announcement of a 30-day discount on petrol sold at NNPC stations, with public transport operators expected to receive priority under the arrangement.
According to the minister, the initiative is intended to ease the burden of fuel prices on consumers without reversing the removal of petrol subsidy in May 2023.
He explained that NNPC Retail purchases petrol from the Dangote Refinery and other suppliers at market prices before adding its retail margin to determine the pump price.
Under the discount arrangement, the company would reduce or temporarily forgo part of that margin, allowing it to sell petrol at a lower price without the government covering the difference.
“A margin discount means the retailer chooses to take a smaller margin, or no margin at all for a period, and passes the saving to the customer. The cost of the discount is borne by the retailer alone,” Oyedele said.
He distinguished the arrangement from the former subsidy system, under which public revenue covered part of the cost of petrol.
The minister also warned that selling crude oil belonging to the Federation below market prices would have different implications, as the resulting shortfall would ultimately be borne by public revenue.
Oyedele argued that the discount could also benefit NNPC Retail commercially if lower prices attracted more customers and increased sales volumes. He said higher sales could offset the reduced profit margin per litre and potentially support the company’s profits and dividend payments to the Federation.
The minister had previously warned that restoring fuel subsidy could cost Nigeria more than ₦20 trillion annually, putting additional pressure on public finances, the naira and petrol prices.
Oyedele said the discount formed part of broader government measures to cushion the impact of high fuel prices on households and businesses without restoring a blanket subsidy.
Other measures announced by the government include a proposed ceiling of ₦1,350 per litre on petrol’s ex-gantry or landing cost, expanded compressed natural gas deployment, additional support for vulnerable households and subsidised credit for small businesses and consumers.
The government is also considering an excess-profit tax on operators found to be taking undue advantage of consumers during the energy crisis. According to Oyedele, proceeds from the proposed measure would be directed towards interventions for vulnerable people.
He said the NNPC Retail discount was unlikely to create the same incentive for cross-border fuel smuggling associated with previous subsidy arrangements, arguing that retail margins account for less than five per cent of the pump price.
Oyedele acknowledged that petrol prices remained a burden on households and businesses but maintained that targeted interventions were preferable to restoring a subsidy system the government says it can no longer afford.