The Federal Government has clarified that the petrol discount introduced by the Nigerian National Petroleum Company Limited (NNPC) Retail Limited is not a reinstatement of fuel subsidy, explaining that the price reduction is being funded entirely by the company’s decision to forgo its retail profit margin.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, made this known in a statement issued by the Federal Ministry of Finance in Abuja on Friday, stressing that the arrangement does not involve funds from the federal budget or the Federation Account.

The clarification followed the Presidency’s announcement that NNPC Retail would temporarily sell petrol at cost by suspending its retail margin as part of efforts to cushion Nigerians against rising global oil prices.

In an earlier statement on Thursday, the Special Adviser to the President on Information and Strategy, Bayo Onanuga, said the initiative was backed by President Bola Tinubu and did not represent a reversal of the fuel subsidy removal implemented in 2023.

Oyedele explained that a retail discount occurs when a business reduces or temporarily eliminates its profit margin to offer customers lower prices, with the retailer bearing the cost of the reduction.

He distinguished this from a fuel subsidy, under which the government uses public revenue to cover part of the cost of petrol to reduce the amount paid by consumers.

According to the minister, NNPC Retail continues to purchase petrol from the Dangote Refinery and other suppliers at prevailing market prices under commercial arrangements. The company then reduces its retail margin to pass the savings on to customers.

He, however, noted that selling crude oil below market value could constitute a subsidy if the resulting financial shortfall were covered with public funds.

The minister said NNPC Retail, a subsidiary of NNPC Limited, was established to support the distribution and availability of petroleum products across the country, with its responsibilities extending beyond profit maximisation.

He argued that the temporary reduction in retail margins could also benefit the company financially in the long run by attracting more customers, increasing sales volumes and strengthening customer loyalty.

Oyedele said these factors could potentially offset the lower earnings per litre and support the company’s profits and dividend payments to the Federation.

Addressing concerns that the discount could encourage the smuggling of petrol into neighbouring countries, the minister said the retail margin accounts for less than five per cent of the pump price.

He maintained that reducing a margin of this size would be unlikely to significantly widen the price gap between Nigeria and neighbouring countries, where petrol prices are reportedly 20 to 40 per cent higher.

The government also highlighted other interventions aimed at reducing the financial burden of fuel costs, including expanding the use of compressed natural gas for transportation, waiving certain taxes and duties on petrol, and eliminating illegal charges that contribute to higher transportation costs.

Oyedele said the measures were designed to provide relief to consumers without reintroducing a subsidy system that the government considers financially unsustainable.