The Federal Government has clarified that the petrol discount introduced by the Nigerian National Petroleum Company Limited’s retail subsidiary does not represent a return to fuel subsidy, insisting that no public funds are being used to reduce pump prices at its filling stations.
The government explained that the discount was made possible by NNPC Retail Limited’s decision to cut its retail profit margin, rather than through payments from the federal budget or the Federation Account.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, stated this 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 followed an earlier announcement by the Presidency that NNPC Retail would waive its retail profit margin on petrol and sell the product at cost as part of efforts to cushion households against global oil-price shocks.
In a statement issued on Thursday and signed by the Special Adviser to the President on Information and Strategy, Bayo Onanuga, the Presidency said the initiative, backed by President Bola Tinubu, was not a return to the petrol subsidy regime abolished in 2023.
Explaining the distinction between a retail discount and a subsidy, Oyedele said, “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.”
He added, “A margin discount means the retailer chooses to take a smaller margin, or no margin at all for a period, and passes the saving to the customer. The cost of the discount is borne by the retailer alone.”
According to the minister, a subsidy occurs when the government pays part of the price consumers would otherwise pay, using public revenue.
“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.
Oyedele reiterated that the current arrangement was not financed with public funds, stating, “The discount is not funded by the federal budget or the Federation Account.”
He explained that NNPC Retail purchases petrol from the Dangote Refinery and other suppliers at prevailing market prices and under commercial terms before adding its retail margin. Under the discount arrangement, the company reduces that margin to lower the price paid by motorists and other customers.
The minister also noted that selling crude oil below market prices could constitute a subsidy if the resulting financial shortfall were covered with public revenue.
NNPC Retail, a wholly owned subsidiary of NNPC Limited, was established more than 20 years ago as a petroleum marketing and retail company. Oyedele said its responsibilities included ensuring the availability and affordability of refined petroleum products across the country.
“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.
He argued that reducing the profit margin on each litre of petrol would not automatically lead to lower overall profits for NNPC Retail or reduced dividends to the Federation. According to him, increased sales volumes and stronger customer loyalty could compensate for the temporary reduction in margins.
“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,” he said.
He added, “Together, these can raise NNPC Retail’s profits, and the dividends paid to the Federation: a win-win for consumers and for government.”
Addressing concerns that the discount could encourage petrol smuggling into neighbouring countries, Oyedele said NNPC Retail’s profit margin accounted for less than five per cent of the pump price.
“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.
He further stated, “It therefore creates no new incentive for smuggling, and no distortion of the kind that subsidy regimes produced in the past.”
The minister also highlighted other government initiatives intended to reduce the impact of fuel costs, including expanding the use of compressed natural gas for transportation, waiving taxes and duties on petrol, and removing illegal levies that contribute to higher transport fares.
“Each is designed to bring relief without returning Nigeria to a subsidy regime that the country can no longer afford,” he said.
Summarising the government’s position, Oyedele said, “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.”