Petrol Discount Funded From NNPC Retail’s Margin, Not Federation Account, FG Says

The federal government has said the discount on petrol at NNPC Retail Limited stations is paid for out of the company’s own retail margin and not from the federal budget or the Federation Account.

Minister of finance and coordinating minister of the economy, Taiwo Oyedele, said this in a statement on Friday, responding to commentators who described the discount as a return of fuel subsidy.

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He said NNPC Retail buys petrol from the Dangote Refinery and other suppliers at market prices, on commercial terms, then adds its margin to set the pump price. The discount comes out of that margin alone, so the discounted pump price remains market-reflective.

“The cost of the discount is borne by the retailer alone,” the statement said, adding that a subsidy, by contrast, is paid from public revenue that would otherwise go to salaries, schools, hospitals and infrastructure.

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The minister said selling crude owned by the Federation below market price would amount to a subsidy, because public revenue would bear the shortfall. He said that is not the case with the retail discount.

On whether lower margins would cut dividends paid by NNPC Limited to the Federation, Oyedele said they need not. He argued that selling more litres and building customer loyalty could offset the smaller margin and raise profits.

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He added that the retail margin is less than 5 per cent of the pump price, so the discount cannot meaningfully widen the gap with neighbouring countries, where petrol costs 20 to 40 per cent more. It therefore creates no new incentive for smuggling, he said.

The minister said the subsidy regime was ended in 2023 and “is not coming back.” He listed the discount among other relief measures, including expanded CNG transport, waivers of taxes and duties on petrol, and removal of illegal levies that inflate transport costs.