FG Says NNPC Petrol Price Cut Comes From Retail Margin, Not Treasury

The Federal Government has defended the temporary reduction in petrol prices at NNPC Retail outlets, saying the company is absorbing the cost through its commercial margin rather than drawing money from government accounts.

Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele gave the clarification in a statement released by the Federal Ministry of Finance in Abuja on Friday. His explanation followed debate over whether NNPC Retail's decision to sell petrol at a reduced price amounted to restoring the subsidy system discontinued in 2023.

Oyedele said NNPC Retail purchases petrol from the Dangote Refinery and other suppliers under market-based commercial arrangements. The company normally adds a retail margin before determining what customers pay at its stations. Under the current intervention, according to the minister, that margin is being reduced or temporarily surrendered so motorists receive a lower price.

He distinguished that approach from a government subsidy, explaining that the latter requires public revenue to cover part of the amount consumers would otherwise pay. Oyedele said neither allocations from the federal budget nor money belonging to the Federation Account was being used to finance the NNPC Retail reduction. He added that selling crude owned by the Federation below its market value would be different because taxpayers and other beneficiaries of public revenue would ultimately bear the shortfall.

The minister also addressed questions about whether sacrificing retail earnings could lower NNPC's profits and consequently affect dividends paid to the Federation. He argued that this outcome was not inevitable because increased sales volumes and longer-term customer loyalty could compensate for a smaller profit on each litre sold. That assessment represents the government's commercial expectation for the initiative rather than a guaranteed financial outcome.

Oyedele further rejected concerns that the lower retail price could create a fresh incentive for cross-border petrol smuggling. He said the retail margin accounts for less than five per cent of the pump price, while petrol in neighbouring countries costs between 20 and 40 per cent more. On that basis, he argued that reducing NNPC Retail's margin would not significantly alter the existing price difference.

NNPC Retail is wholly owned by NNPC Limited and has operated for more than two decades as a petroleum marketing business. Oyedele said its responsibilities include supporting the availability, distribution and affordability of refined petroleum products across Nigeria, meaning its objectives extend beyond maximising the profit made on each retail transaction.

The government says the petrol discount forms only one part of its response to elevated fuel and transportation expenses. Other measures identified by Oyedele include expanding compressed natural gas use in transportation, removing taxes and duties on petrol and tackling unauthorised charges that contribute to transport costs.

The government's central position is therefore that the NNPC Retail initiative is a commercial price reduction funded from the retailer's own margin. It maintains that this distinction separates the arrangement from a subsidy financed through public revenue.