Finance Minister Taiwo Oyedele says the price cut is being funded by NNPC Retail’s reduced profit margin, not government revenue, as the administration seeks to cushion Nigerians against rising fuel costs……
The Federal Government has dismissed claims that the petrol discount introduced by the Nigerian National Petroleum Company Limited’s retail subsidiary amounts to a return of fuel subsidy, insisting that the price reduction does not involve public funds.
The government said NNPC Retail Limited is financing the temporary relief by sacrificing part or all of its retail profit margin on petrol, rather than receiving payments from the federal budget or the Federation Account.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, clarified the arrangement 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 follows an earlier announcement by the Presidency that NNPC Retail would sell petrol at cost by foregoing its retail margin, as part of efforts to shield households from the impact of rising global oil prices.
In a statement issued on Thursday, the Special Adviser to the President on Information and Strategy, Bayo Onanuga, said the initiative was approved by President Bola Tinubu and did not represent a reversal of the petrol subsidy removal introduced in 2023.
Explaining the distinction between the two arrangements, Oyedele said a retail discount involves a company voluntarily accepting lower earnings on each litre sold to make its products more affordable, while a subsidy requires the government to cover part of the cost.
“Some commentators have described the discount as a return of fuel subsidy. That is not correct. Here, plainly, is what the discount is and what it is not,” the minister said.
He explained that under a margin discount, a retailer reduces its profit margin, or temporarily gives it up entirely, and passes the savings directly to customers.
“The cost of the discount is borne by the retailer alone,” he added.
Oyedele said a government subsidy, by contrast, draws on public revenue that could otherwise fund essential services and infrastructure.
“A subsidy is different. It is when government pays part of the price the consumer would otherwise pay. That money comes from public revenue — funds that would otherwise go to salaries, schools, hospitals and infrastructure. That is the regime this administration ended in 2023, and it is not coming back,” he said.
The minister maintained that the current arrangement was not being financed through the Federation Account or the federal government’s budget.
How NNPC Retail Plans To Absorb The Discount
According to Oyedele, NNPC Retail buys petrol from the Dangote Refinery and other suppliers at prevailing market prices under commercial terms before adding its retail margin.
Under the new arrangement, the company reduces that margin, allowing motorists to purchase petrol at a lower price without requiring the government to reimburse the difference.
He, however, cautioned that selling crude oil below market prices could amount to a subsidy if the resulting revenue shortfall were ultimately borne by the public purse.
NNPC Retail, a wholly owned subsidiary of NNPC Limited, has operated as a petroleum marketing and retail company for more than two decades.
Oyedele said its responsibilities include ensuring that refined petroleum products remain available across the country while helping moderate retail prices.
“Its purpose, in other words, is to keep products available across the country and to moderate retail prices, not necessarily to maximise retail profit,” he said.
The minister also argued that sacrificing part of the company’s earnings on each litre of petrol would not automatically translate into lower overall profits or reduced dividends to the Federation.
He said the lower margin could be offset by increased sales volumes and stronger customer loyalty, particularly if more motorists choose NNPC Retail outlets because of the discounted prices.
“A smaller margin or temporary zero margin on each litre can be more than offset by selling more litres over time. And a discount builds customer loyalty that lasts well beyond the discount period itself,” Oyedele said.
He added that the strategy could ultimately benefit both consumers and the government if increased sales translated into stronger business performance and higher dividends.
“Together, these can raise NNPC Retail’s profits, and the dividends paid to the Federation: a win-win for consumers and for government,” he said.
FG Dismisses Fears Of Increased Petrol Smuggling
The government also sought to allay concerns that the discounted petrol prices could encourage the diversion of fuel into neighbouring countries, where pump prices are reportedly higher.
Oyedele said NNPC Retail’s profit margin accounts for less than five per cent of the pump price, limiting the extent to which a discount within that margin could widen the price difference between Nigeria and neighbouring markets.
“The retail margin on petrol is less than 5 percent of the pump price. A discount within that margin cannot meaningfully widen the gap between prices in Nigeria and in neighbouring countries, where petrol already costs 20 to 40 percent more,” he said.
According to the minister, the arrangement does not create a significant new financial incentive for cross-border smuggling or the market distortions associated with previous subsidy regimes.
He maintained that the discount was designed to provide temporary relief to consumers without recreating the fiscal burden that prompted the government to end petrol subsidies in 2023.
Other Measures To Cushion Fuel Costs
Beyond the NNPC Retail discount, Oyedele listed other government initiatives intended to reduce the pressure of fuel costs on households and businesses.
These include expanding the use of compressed natural gas for transportation, waiving taxes and duties on petrol, and eliminating illegal levies that contribute to higher transportation costs.
The measures, he said, are aimed at reducing the cost burden on Nigerians without requiring the government to return to direct payments to keep petrol prices artificially low.
“Each is designed to bring relief without returning Nigeria to a subsidy regime that the country can no longer afford,” he said.
Reiterating the administration’s position, Oyedele said the fundamental difference lies in who bears the cost of the price reduction.
“A subsidy spends public money to lower the price of fuel. The NNPC Retail discount lowers the price without spending any public money, and it can strengthen NNPC Retail’s business at the same time.”
