Fuel subsidy has not returned, Oyedele says amid NNPC petrol discount

Minister of Finance and Coordinating Minister of the Economy, Mr. Taiwo Oyedele

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has said the 30-day petrol discount introduced by the Nigerian National Petroleum Company Limited (NNPC) Retail is not a return of the fuel subsidy regime abolished by the Federal Government in 2023.

Oyedele explained that the discount was being funded entirely from NNPC Retail’s profit margin and did not involve government funds or public revenue.

The minister made the clarification in a statement on Friday, noting that the initiative was a commercial decision aimed at providing temporary relief to consumers while supporting the company’s business operations.

He explained that a margin discount occurs when a retailer reduces or temporarily forgoes part or all of its profit margin to lower prices for customers, while a fuel subsidy involves the government using public revenue to cover part of the cost of petroleum products.

According to him, NNPC Retail purchases petrol from the Dangote Refinery and other suppliers at prevailing market prices before adding its retail margin to determine the pump price.

“The cost of the discount is borne by the retailer alone,” Oyedele said, adding that the arrangement did not amount to a government subsidy because the discounted pump price remained market-reflective.

He, however, distinguished the initiative from the sale of crude oil owned by the Federation below market prices, explaining that such an arrangement would constitute a subsidy because the resulting shortfall would be borne by public revenue.

The minister welcomed the temporary price reduction, saying it would provide relief to households, commuters and transport operators facing high fuel costs.

Oyedele also defended NNPC Retail’s decision to reduce its profit margin, describing it as consistent with the company’s mandate to ensure the availability, distribution and affordability of refined petroleum products across the country.

He said NNPC Retail, a wholly owned subsidiary of NNPC Limited, was established more than 20 years ago as a petroleum marketing and retail business and had historically sold petrol at prices below those of other marketers.

Addressing concerns that the discount could reduce NNPC Limited’s earnings and dividends to the Federation, Oyedele argued that increased sales volumes and improved customer loyalty could compensate for the lower earnings per litre.

According to him, the strategy could ultimately boost NNPC Retail’s profits and increase dividends paid to the Federation, potentially benefiting both consumers and the government.

The Federal Government announced the removal of the petrol subsidy in May 2023 as part of efforts to reduce fiscal pressure and redirect public resources towards other priorities. The policy, however, has contributed to higher transportation and living costs, placing pressure on households and businesses.

Tags: Finance minister fuel subsidy NNPC Tinubu Leave a Reply Cancel replyYour email address will not be published. Required fields are marked *