The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has mentioned the discount on petrol to be offered at Nigerian National Petroleum Company (NNPC) Retail stations is a industrial determination by the retailer and does not quantity to a return of fuel subsidy.
In a press release issued on Friday, Mr Oyedele mentioned the discount was being funded by NNPC Retail by a discount in its retail revenue margin, relatively than from the Federal Government’s finances or the Federation Account.
He mentioned the association was supposed to supply some aid to motorists with out reversing the removing of petrol subsidy in May 2023.
“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,” he mentioned.
The clarification comes a day after the Federal Government introduced a 30-day discount on petrol offered at NNPC stations, with public transport operators anticipated to obtain precedence below the association.
PREMIUM TIMES earlier reported that Mr Oyedele warned that restoring fuel subsidy may value Nigeria greater than N20 trillion yearly and put extra strain on authorities funds, the naira and petrol costs.
How the discount works
Mr Oyedele defined that NNPC Retail buys petrol from the Dangote Refinery and different suppliers at market costs earlier than including its retail margin to find out the pump value.
Under the discount association, the corporate reduces or quickly provides up a part of that margin, permitting it to promote petrol at a cheaper price with out the federal government paying the distinction.
He distinguished this from the previous subsidy system, below which public income was used to cowl a part of the price of petrol.
The minister mentioned promoting crude oil owned by the Federation under market costs could be completely different as a result of the ensuing shortfall would finally be borne by public income.
He additionally argued that the discount may gain advantage NNPC Retail commercially if decrease costs attracted extra clients and elevated gross sales volumes.
According to him, increased gross sales may offset the decreased margin per litre and doubtlessly assist the corporate’s earnings and dividend funds to the Federation.
READ ALSO: NNPC filling stations to sell petrol at landing cost to cushion global oil price shocks — Presidency
Government defends focused aid
Mr Oyedele mentioned the discount was a part of broader measures to scale back the strain of excessive fuel costs on households and companies with out restoring a blanket subsidy.
Other measures introduced by the federal government embrace a proposed ceiling of N1,350 per litre on the ex-gantry or touchdown value of petrol, expanded compressed pure fuel deployment, extra assist for susceptible households and subsidised credit score for small companies and customers.
The authorities is additionally contemplating an excess-profit tax on operators discovered to be taking undue benefit of customers through the power disaster. Mr Oyedele mentioned proceeds could be directed in direction of measures to cushion the affect of fuel costs on susceptible individuals.
The minister mentioned the NNPC Retail discount was unlikely to create the identical incentive for cross-border fuel smuggling related to earlier subsidy preparations. He argued that retail margins account for lower than 5 per cent of the pump value, limiting the extent to which the discount may widen the value hole between Nigeria and neighbouring international locations.
He acknowledged that fuel costs remained a burden on households and companies however maintained that focused interventions have been preferable to a return to a subsidy system that the federal government says it might not afford.
The new clarification comes amid continued public debate over the rising value of petrol and requires the federal government to do extra to ease the affect on transport prices and family spending.
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