The Federal Government has clarified that the petrol discount offered by NNPC Retail Limited is not a return of fuel subsidy, saying the price reduction is being funded from the company’s retail margin rather than public revenue.
Taiwo Oyedele, Minister of Finance and Coordinating Minister of the Economy, gave the clarification in a statement on Friday, following concerns that the discount amounted to a reversal of the government’s 2023 petrol subsidy removal.
According to Oyedele, NNPC Retail is reducing the margin it earns on petrol sales and passing the savings to consumers, without drawing funds from the federal budget or the Federation Account.
“The cost of the discount is borne by the retailer alone,” the minister said, explaining that a margin discount differs from a subsidy, in which government pays part of the price that consumers would otherwise bear.
The clarification follows the government’s announcement of a 30-day petrol discount on products sold by NNPC Retail, with priority for public transport operators.
Pinnacle Daily earlier reported that the government also said it was negotiating a ceiling of ₦1,350 per litre on petrol’s ex-gantry or landing cost as part of efforts to moderate pump-price volatility.
In his clarification, Oyedele stressed that the retail discount was a commercial decision by NNPC Retail and did not involve government spending.
“The discount is not funded by the federal budget or the Federation Account,” he said.
He explained that NNPC Retail buys petrol from the Dangote Refinery and other suppliers at market prices, then adds a retail margin to determine the pump price.
The current discount comes from that margin, allowing the company to reduce the price charged to motorists without the government paying the difference.
The minister distinguished this arrangement from selling crude oil owned by the Federation below market prices.
He said such a practice would amount to a subsidy because the shortfall would be borne by public revenue.
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Discount could boost NNPC Retail profits
Oyedele also stated that the discount could benefit consumers while strengthening NNPC Retail’s business, arguing that lower earnings on each litre sold could be offset by higher sales volumes and improved customer loyalty.
He said a temporary reduction in the retail margin, including taking no margin for a period, could encourage more motorists to buy from the company and support sales beyond the discount period.
The minister also dismissed concerns that the discount would necessarily reduce profits and dividends paid to the Federation, saying higher sales volumes could offset the lower margin per litre.
Pinnacle Daily reports that NNPC Retail Limited is a wholly owned subsidiary of NNPC Limited.
It was established more than 20 years ago as a petroleum marketing and retail company, with a mandate to support the nationwide availability, distribution and affordability of refined petroleum products.
Oyedele maintained that the current discount continued that role, adding that NNPC Retail had historically sold petrol below the prices charged by other marketers.
The minister also argued that the discount would not create a significant new incentive for petrol smuggling.
He said the retail margin accounts for less than five per cent of the pump price, while petrol in neighbouring countries already costs 20 to 40 per cent more than in Nigeria.
According to him, reducing a margin of that size would not meaningfully widen the price gap between Nigeria and neighbouring countries.
Cites other measures to ease fuel costs
Oyedele acknowledged that petrol prices continue to put pressure on households and businesses but said the discount was one of several measures being pursued to reduce the burden.
He listed the expansion of compressed natural gas (CNG) transport, the waiver of taxes and duties on petrol, and the removal of illegal levies that increase transport costs as other measures intended to provide relief without restoring the former subsidy regime.
The minister further maintained that the distinction rests on who bears the cost of the price reduction, as under a subsidy, the government uses public money to lower the price paid by consumers, while under the NNPC Retail arrangement, the company reduces its own margin.
The government’s position is that the discount can lower pump prices while remaining a commercial decision by the retailer, rather than a public expenditure commitment.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X