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Finance Minister Taiwo Oyedele insists the 30-day NNPC Retail petrol discount is not a return to subsidy, saying the reduction comes entirely from the company’s retail profit margin without public funding.
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The Federal Government says NNPC Retail buys petrol from the Dangote Refinery and other suppliers at market prices, with the discount applied to its retail margin rather than financed through the federal budget or Federation Account.
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Oyedele argues that increased sales volumes and customer loyalty could offset the reduced margin, potentially boosting NNPC Retail’s profits and dividends paid to the Federation.
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The government lists expanded compressed natural gas (CNG) transport, tax and duty waivers on petrol, and the removal of illegal levies among other measures aimed at easing fuel and transportation costs.
October 09, (THEWILL) – The Federal Government has pushed back against criticism of the 30-day petrol discount introduced by the Nigerian National Petroleum Company Limited (NNPC Ltd), insisting that the initiative is not a return to fuel subsidy and does not involve public funds.
The government said the discount was a commercial decision by NNPC Retail Limited to reduce its retail profit margin and pass the savings to consumers, rather than an arrangement requiring taxpayers’ money to keep petrol prices artificially low.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, stated this in a press release issued by the Federal Ministry of Finance on Friday.
The clarification comes amid criticism from opposition political figures who have questioned the duration, scope and effectiveness of the initiative, arguing that a 30-day discount would not provide lasting relief from high petrol prices and rising living costs.
Oyedele said motorists had been paying less for petrol at NNPC Retail outlets since October 1, following a reduction in the company’s retail margin. He explained that the arrangement was different from the former petrol subsidy regime because NNPC Retail, rather than the government, would bear the cost of the discount.
“Every marketer adds a margin to the price it pays for the fuel it sells. 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”, the minister stated.
According to him, a subsidy occurs when the government pays part of the price consumers would otherwise pay, using public revenue to cover the difference.
Oyedele said that under the current arrangement, the discount was not funded through the federal budget or the Federation Account, insisting that the administration had no plan to restore the subsidy regime it ended in 2023.
He explained that NNPC Retail purchases petrol from the Dangote Refinery and other suppliers at prevailing market prices on commercial terms before adding its retail margin to determine the pump price.
The discount, he said, comes from that margin alone, allowing the company to reduce the price charged to consumers without requiring government compensation.
The minister also distinguished the arrangement from selling crude oil owned by the Federation below market prices, which he said would amount to a subsidy because the resulting shortfall would be borne by public revenue.
Oyedele maintained that the NNPC Retail discount was a commercial decision that other fuel retailers were equally free to adopt.
He said NNPC Retail, a wholly owned subsidiary of NNPC Ltd, was established more than 20 years ago to support the nationwide availability, distribution and affordability of refined petroleum products.
According to the minister, the company’s role includes maintaining access to fuel across the country and moderating retail prices, rather than focusing exclusively on maximising profit on every litre sold.
He said the current discount was consistent with that responsibility and could also produce commercial benefits for the company over time.
Addressing concerns that the reduction in retail margins could weaken NNPC’s profitability and reduce dividends paid to the Federation, Oyedele argued that increased sales volumes and customer loyalty could offset the immediate sacrifice.
“A smaller margin or temporary zero margin on each litre can be more than offset by selling more litres over time”, he noted, adding that the discount could encourage motorists to continue buying petrol from NNPC Retail outlets even after the temporary arrangement ends, potentially increasing the company’s overall sales and profits.
According to him, the expected outcome could benefit consumers through lower prices while sustaining or increasing the dividends paid to the Federation.
The minister also dismissed concerns that the discount could distort the domestic petroleum market or encourage fuel smuggling into neighbouring countries.
He said the retail margin on petrol was less than five per cent of the pump price, arguing that a reduction within that margin would not significantly widen the price difference between Nigeria and neighbouring countries.
Oyedele noted that petrol prices in neighbouring countries were already between 20 and 40 per cent higher than those in Nigeria, adding that the discount was unlikely to create a new incentive for cross-border smuggling.
The government acknowledged that fuel prices continued to place pressure on households and businesses, describing the discount as one of several measures intended to ease the burden.
Other measures listed by the minister include expanding compressed natural gas (CNG) transport, waiving taxes and duties on petrol, and removing illegal levies that increase transportation costs.
He said the initiatives were designed to provide relief without returning Nigeria to a subsidy system that the government considers fiscally unsustainable.
Background
President Bola Tinubu announced the removal of petrol subsidy during his inaugural address on May 29, 2023. The decision was followed by a sharp increase in petrol prices, raising transportation and distribution costs and contributing to inflationary pressures across the economy.
The higher cost of moving goods and people has affected households, traders, manufacturers and transport operators, while the rising prices of food and other essential goods have intensified concerns over living standards.
The Federal Government has defended subsidy removal as necessary to reduce fiscal pressures and free resources for other public priorities. However, opposition parties, labour organisations and other critics have continued to demand measures that would provide more substantial and lasting relief.
The latest NNPC Retail discount has renewed the debate over the difference between a government-funded subsidy and a retailer-funded price reduction. Under a subsidy, public revenue covers part of the cost of fuel, while a retail-margin discount involves the seller accepting a lower profit per litre.
The government maintains that the current arrangement falls into the latter category. However, questions remain over the extent of the savings consumers will receive, whether the discount will translate into lower transport fares and what relief will be available after the 30-day period expires.
Felix Ifijeh is a journalist with years of professional reporting experience. Known for his keen news sense, compelling storytelling and commitment to accurate, impactful reporting, he has built a reputation for turning leads into clear, engaging, and well-structured reports that resonate with readers. His work reflects deep newsroom experience and a commitment to accurate, impactful journalism.
