The Minister of Finance, Taiwo Oyedele, has made five key clarifications regarding the recent announcement of a fuel price discount at Nigerian National Petroleum Company Limited, NNPCL, filling stations.
In a statement he personally signed on Friday, Oyedele said
the discounted petrol price of N1,350 per litre at NNPCL filling stations does
not amount to a return of fuel subsidy.
According to him, no public funds would be used to cover the
discount at NNPCL filling stations.
See the full statement below:
Since October 1, 2026, motorists have been paying less for
petrol at NNPC Retail Limited stations following a discount on the company’s
retail margin. We welcome the relief this brings to households, commuters and
transporters.
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.
1. A Margin Discount and a Subsidy Are Not the Same
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 savings on to the
customer. The cost of the discount is borne by the retailer alone.
A subsidy is different. It is when the 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.
2. No Public Money Pays for the Discount
The discount is not funded by the federal budget or the
Federation Account. NNPC Retail buys petrol from the Dangote Refinery and other
suppliers at market prices and on commercial terms, then adds its retail margin
to determine the pump price. The discount comes out of that margin alone, so
the discounted pump price remains market-reflective.
This is quite different from crude oil owned by the
Federation. Selling the nation’s crude below market price would amount to a
subsidy because the shortfall would be borne by public revenue.
3. NNPC Retail Is Doing What It Was Set Up to Do
NNPC Retail Limited, a wholly owned subsidiary of NNPC
Limited, began operations over 20 years ago as a petroleum marketing and retail
company. It was established to ensure the nationwide availability, distribution
and affordability of refined petroleum products.
Its purpose, in other words, is to keep products available
across the country and moderate retail prices, not necessarily to maximise
retail profit. It has historically sold fuel at prices below those of other
marketers. The current discount continues that role, and it is a commercial
decision that any retailer is free to make.
4. The Discount Is Not Expected to Reduce Federation
Dividends
Some have asked whether a lower margin means lower profits
for NNPCL and, consequently, lower dividends to the Federation. It need not. A
smaller margin or a temporary zero margin on each litre can be more than offset
by selling more litres over time. A discount can also build customer loyalty
that lasts well beyond the discount period itself.
Together, these factors can increase NNPC Retail’s profits
and the dividends paid to the Federation — a win-win for consumers and the
government. Margin discounts are a routine commercial strategy used by
retailers around the world.
5. The Discount Will Not Distort the Market or Encourage
Smuggling
The retail margin on petrol is less than 5 per cent of the
pump price. A discount within that margin cannot meaningfully widen the gap
between prices in Nigeria and those in neighbouring countries, where petrol
already costs 20 to 40 per cent more.
It therefore creates no new incentive for smuggling and
causes no distortion of the kind that subsidy regimes produced in the past.
The Bottom Line
A subsidy uses public money to lower the price of fuel. The
NNPC Retail discount lowers the price without spending public money, and it can
strengthen NNPC Retail’s business at the same time.
We recognise that fuel prices continue to weigh on
households and businesses. The discount is one of several measures the
government is pursuing to ease that burden, alongside the expansion of CNG
transport, the waiver of taxes and duties on petrol, and the removal of illegal
levies that inflate transport costs.
Each measure is designed to bring relief without returning
Nigeria to a subsidy regime that the country can no longer afford.
Taiwo Oyedele
Honourable Minister of Finance and Coordinating Minister of
the Economy
Advertise on NigerianEye.com to reach thousands of our daily users
No comments
Post a Comment
Kindly drop a comment below.
(Comments are moderated. Clean comments will be approved immediately)
Advert Enquires - Reach out to us at NigerianEye@gmail.com