Petrol discount not subsidy says Presidency

By Samuel Solomon

The Federal Government on Thursday announced that the Nigerian National Petroleum Company Limited will forgo its retail profit margin on petrol and sell to Nigerians at cost, as part of measures to cushion households from global crude oil price shocks.

This was as the Presidency said the arrangement, backed by President Bola Tinubu, does not signal the return of the petrol subsidy, which ended on May 29, 2023.

The petrol price slash was among a raft of measures announced by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, on Thursday.

In a statement signed Thursday by the Special Adviser to the President on Information and Strategy, Bayo Onanuga, the Presidency said NNPC Retail, which already sells petrol at the lowest price in the market, will roll out the new deal within 30 days.

The statement is titled ‘NNPC retail forgoes petrol profit margin to offer some support to Nigerian households amid global petrol crisis; FG announces additional measures.’

“This means if NNPC’s landing cost is N1300, it will sell fuel to Nigerians, especially commercial vehicles, at the same price,” the statement read.

Briefing journalists on Thursday, Oyedele said the Federal Government hoped other marketers would follow NNPCL’s example, as the sharp rise in crude and petrol prices was not expected to last long.

The Presidency said the Federal Government was also negotiating a ceiling of N1,350 per litre on the ex-gantry or landing cost of petrol to keep pump prices stable.

It said where costs rise above the ceiling, refiners and importers will bear the shortfall and recover it later, when crude prices or the exchange rate allow, without breaching the ceiling.

“This is neither a subsidy nor a price control: it is designed to smooth prices over time rather than suppressing them,” Oyedele was quoted as saying, adding, “The reasoning is simple. 1,400 naira a litre today and 1,400 tomorrow is better than 1,500 today and 1,300 tomorrow, because volatility itself adds to uncertainty and cost. And when fares rise sharply, they rarely fall as fast. The ceiling will be reviewed monthly, reset as costs require, and the figures published for transparency.”

The FG, he said, will also sell crude forward to domestic refineries. According to the statement, this is expected to shield pump prices from global volatility as production rises and previously committed crude is freed up.

The statement noted that under the 2025 tax reform laws, the Federal Government, working with the states and security agencies, was reining in the collection of road taxes and levies that inflate fares and logistics costs. It is also increasing funding for cash transfers to the most vulnerable households and for subsidised credit to small businesses and consumers.

The other measures listed include the CNG rollout, where the FG is scaling up compressed natural gas deployment with the states, and expects transporters to pass on the savings to passengers through lower fares. CNG is 60 to 70 per cent cheaper than petrol, the statement said.

It said excess profit tax will be considered for operators who take undue advantage of consumers anywhere along the energy value chain.

Proceeds will be used only to cushion fuel prices through transport support or vouchers for urban minimum-wage earners. The government will also work with the National Assembly on enhanced tax relief for low-income earners under the 2027 Finance Bill.

The FG, according to Onanuga, is cutting regulatory costs that feed into the cost of doing business and, indirectly, into the prices of goods and services. The FG, he added, is investing in a reserve from which it will release refined products into the market, under published rules, whenever a global disruption or hoarding threatens supply and price stability.

The Presidency said this was “not a subsidy” and did not fix prices, but secured supply and would deter artificial scarcity and market manipulation.

It argued that traffic management agencies will improve traffic flow in major urban centres to cut fuel consumption, while NIPOST’s newly launched address codes will make logistics more efficient and cheaper.

The Presidency explained that none of the measures restored a blanket subsidy, adding that doing so “would create longer-term harm for a short-term cure.”

It said, “Removing the fuel subsidy came at a price. But the alternative has been tried. Nigeria has already lived through that cycle: scarcity, smuggling, a collapsing currency and a fiscal crisis. We cannot afford to live through it again, least of all in response to a temporary disruption, and at the very moment the results of reform are gathering pace.

“Government is not out to reverse a necessary reform designed to set our country on the path towards sustained prosperity. It is to ensure its gains reach more Nigerians, faster and in more tangible ways. That is our work, and we are committed to doing it.”

The Presidency added that the FG was working on a comprehensive package of fiscal measures to bring inflation down to single digits sustainably in the near term.