President Bola Tinubu's administration has introduced measures to cushion households and businesses against rising fuel prices. On October 8, Finance Minister Taiwo Oyedele announced that Nigerian National Petroleum Company Limited (NNPC Ltd) retail stations would sell petrol at cost, forgoing their profit margin for an initial 30 days. This move follows a ₦66-per-litre discount introduced by NNPC Retail on October 1 to mark Nigeria's 66th Independence anniversary.
The government's measures aim to reduce petrol prices, but maintain that they do not restore the former petrol-subsidy regime. NNPC Retail purchases petrol from suppliers at market prices, adding a retail margin that accounts for less than 5% of the pump price. The discount is financed through a reduction in NNPC Retail's profit margin, rather than payments from the federal budget or Federation Account. Motorists can access the discount by using the NNPC Fuel App and paying digitally.
However, access to the discount may be limited for motorists without smartphones or suitable digital-payment arrangements. Observations in Abuja found that customers paying directly at pumps were charged ₦1,405 per litre, compared with ₦1,339 for those using the app. NNPC has not published the number of customers who have received the discount or the volume of petrol sold at reduced prices. The presidency illustrated the margin waiver using a hypothetical landing cost of ₦1,300 per litre, but this was an example, not an announced nationwide pump price.
The government is also negotiating a ₦1,350-per-litre ceiling on petrol's ex-gantry or landing cost. Refiners and importers would initially absorb costs above the ceiling and recover the difference later, when crude prices or exchange rates become more favourable. The administration plans to increase forward crude sales to domestic refineries as production rises and previously committed supplies become available. These measures aim to reduce petrol prices and improve supply certainty.
Atiku Abubakar, the African Democratic Congress (ADC) presidential candidate, proposes a production subsidy for qualifying petroleum products refined in Nigeria. His plan involves supporting domestic refineries, including modular refineries, by supplying crude at prices below the prevailing market rate. The difference would be treated as production support, with the final formula set out in the programme's implementation framework and budget. Atiku has pledged to begin implementing a transparent production subsidy from his first day in office.
Atiku's campaign has not disclosed the discount rate, eligible crude volume, annual spending ceiling, or formula for determining consumer savings. Former Rivers State Governor Rotimi Amaechi illustrated the proposal using hypothetical figures, suggesting that crude valued at ₦15,000 could be supplied to participating refineries at ₦10,000, with the ₦5,000 difference constituting the subsidy. The question of who would bear that difference remains unresolved.
The government's discount operates at the retail stage, while Atiku's proposal targets production costs. The two approaches differ in where support enters the supply chain, how it is financed, and whether consumers receive the intended savings. The distinction between the plans lies in their mechanisms, financing, and potential impact on petrol prices.
Key points
- The Nigerian government has introduced a temporary discount on petrol prices, while opposition candidate Atiku Abubakar proposes a production subsidy for domestic refineries.
- The government's measures aim to reduce petrol prices without restoring the former subsidy regime.
- Atiku's proposal targets production costs, with a focus on supporting domestic refineries and potentially reducing petrol prices.
