NNPC petrol discount is not a return to fuel subsidy, Finance Minister

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has said that the discount on petrol sold at Nigerian National Petroleum Company (NNPC) Retail stations is a business decision by the retailer. He stated it does not mean the government is bringing back fuel subsidy.

In a statement released on Friday, Mr Oyedele explained that NNPC Retail is funding the discount by lowering its profit margin. He said this is not coming from the government’s budget or the Federation Account.

He mentioned that this plan is meant to help motorists without going back on the removal of fuel subsidy that happened in May 2023. "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," he said.

This clarification came after the Federal Government announced a 30-day discount on petrol at NNPC stations. Public transport operators are expected to be prioritized under this new plan.

PREMIUM TIMES earlier reported that Mr Oyedele warned that bringing back fuel subsidy could cost Nigeria over N20 trillion every year. He said this would put more pressure on government finances, the naira, and petrol prices.

Mr Oyedele explained that NNPC Retail buys petrol from the Dangote Refinery and other suppliers at market prices. After that, they add their retail margin to set the pump price. With the discount, the company reduces or temporarily gives up some of that margin. This allows them to sell petrol at a lower price without the government having to cover any costs.

He made it clear that this is different from the previous subsidy system, where public funds were used to cover part of the petrol cost. The minister said selling crude oil owned by the Federation below market prices would be different. This would mean the shortfall would affect public funds.

He also mentioned that the discount might actually help NNPC Retail if lower prices bring in more customers and boost sales. According to him, selling more could balance out the reduced margin per litre and possibly help the company’s profits and dividend payments to the Federation.

Mr Oyedele said the discount is part of wider efforts to ease the burden of high fuel prices on families and businesses. These efforts do not include restoring a general subsidy.

Other plans from the government include a proposed limit of N1,350 per litre on the ex-gantry or landing cost of petrol, more deployment of compressed natural gas, extra support for vulnerable households, and subsidized loans for small businesses and consumers.

The government is also looking into a tax on extra profits for operators who may be taking advantage of consumers during the energy crisis. Mr Oyedele said the money from this tax would go towards helping those affected by high fuel prices.

He noted that the NNPC Retail discount is unlikely to lead to the same fuel smuggling problems seen with past subsidy systems. He argued that retail margins make up less than five per cent of the pump price. This means the discount won't create a big price difference between Nigeria and neighboring countries.

He admitted that fuel prices are still a heavy load for families and businesses. But he insisted that targeted help is better than going back to a subsidy system that the government claims it can no longer afford.

This new statement comes as discussions continue about the rising petrol prices and calls for the government to do more to lessen the impact on transport costs and what families spend.