Precious Nwonu, Enugu

The Federal Government has maintained that the petrol discount introduced by the Nigerian National Petroleum Company Limited (NNPC) will not be financed with public funds, describing the initiative as a temporary reduction in the company’s retail profit margin rather than a return to fuel subsidy.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, explained the government’s position in a statement issued by the Federal Ministry of Finance in Abuja on Friday, titled, “The NNPC Retail Discount Is Not a Subsidy: No Public Money Is Involved.”

The clarification followed an announcement by the Presidency that NNPC Retail Limited would temporarily forgo its profit margin on petrol and sell the product at cost to cushion households against fluctuations in global oil prices.

The Presidency, in a statement signed by the Special Adviser to the President on Information and Strategy, Bayo Onanuga, said the initiative had the backing of President Bola Tinubu and was not a reinstatement of the subsidy removed in 2023.

Oyedele said the discount and fuel subsidy were fundamentally different, explaining that the former involved a retailer reducing its earnings to offer customers lower prices, while the latter required the government to pay part of the cost using public revenue.

“Some commentators have described the discount as a return of fuel subsidy. That is not correct,” the minister said.

He stressed that the financial burden of the discount rested solely on NNPC Retail, adding that neither the federal budget nor the Federation Account would be used to fund the price reduction.

According to him, NNPC Retail purchases petrol from the Dangote Refinery and other suppliers at prevailing market prices and on commercial terms before applying its retail margin. Under the new arrangement, the company reduces or temporarily removes that margin to lower pump prices.

The minister warned that selling crude oil below market prices could amount to a subsidy if the resulting revenue shortfall were covered with public funds.

He explained that NNPC Retail, a wholly owned subsidiary of NNPC Limited, had operated for more than two decades as a petroleum marketing and retail company, with responsibilities that include improving the availability and affordability of refined petroleum products nationwide.

Oyedele argued that the temporary reduction in profit per litre would not necessarily translate into lower overall earnings for the company, as increased sales volumes and stronger customer loyalty could compensate for the reduced margin.

He said the arrangement could ultimately benefit both consumers and the government through higher sales and potentially increased dividends paid to the Federation.

The minister also dismissed concerns that the discount could encourage petrol smuggling into neighbouring countries, noting that retail margins accounted for less than five per cent of the pump price.

He said the discount would not significantly widen the price difference between Nigeria and neighbouring countries, where petrol prices were reportedly 20 to 40 per cent higher.

According to Oyedele, the limited reduction in retail margins would therefore not create a new incentive for cross-border smuggling comparable to the distortions associated with previous subsidy arrangements.

He listed other government interventions intended to reduce the impact of fuel costs, including expanding compressed natural gas adoption for transportation, waiving taxes and duties on petrol, and removing illegal charges that contribute to higher transportation costs.

Oyedele said the measures were designed to provide economic relief without returning the country to a subsidy system the government considers financially unsustainable.