KEY POINTS
• NNPC Retail will forgo its petrol retail profit margin for 30 days under a measure backed by President Bola Tinubu.
• The Federal Government is negotiating a proposed N1,350 per litre ceiling on petrol’s ex gantry or landing cost.
• Other measures include forward crude sales to domestic refineries, expanded compressed natural gas adoption and targeted support for vulnerable households.
MAIN STORY
President Bola Tinubu has backed a 30 day waiver of NNPC Retail’s petrol profit margin as part of government efforts to cushion Nigerians against rising fuel prices and global oil market volatility.
The measure was announced on Thursday by the Minister of Finance and Coordinating Minister of the Economy, Mr Taiwo Oyedele, according to a statement issued by Presidential Spokesperson, Mr Bayo Onanuga, in Abuja.
Under the arrangement, NNPC Retail will sell petrol at cost for the next 30 days, without adding its retail profit margin. If the company’s landing cost is N1,300 per litre, for instance, it will sell at that price without an additional retail margin.
Oyedele said the government was also negotiating a ceiling of N1,350 per litre on petrol’s ex gantry or landing cost. The proposed ceiling is not a confirmed retail pump price, and negotiations over the arrangement are still ongoing.
The minister expressed hope that other fuel marketers would adopt a similar approach, adding that the recent increase in crude oil and petrol prices was not expected to last indefinitely. He cautioned, however, against interpreting the NNPC measure as a return to petrol subsidy, which ended on May 29, 2023.
The government is also planning forward sales of crude oil to domestic refineries to reduce the exposure of domestic fuel prices to global market fluctuations. Oyedele said the arrangement would be supported by higher crude oil production and the release of previously committed crude volumes.
Under the proposed mechanism, refiners and importers would initially bear costs above the landing cost ceiling and recover the shortfall later if crude oil prices or the exchange rate improved.
“This is neither a subsidy nor a price control: it is designed to smooth prices over time rather than suppressing them,” Oyedele said.
He added that the proposed ceiling would be reviewed monthly, adjusted to reflect prevailing costs and published to promote transparency.
The government is also working with state governments and security agencies to curb road taxes and levies that contribute to transport fares and logistics costs. The statement said the initiative would be implemented under the 2025 tax reform laws.
Other measures announced include increased funding for cash transfers to vulnerable households, subsidised credit for small businesses and consumers, and an accelerated rollout of compressed natural gas (CNG) in collaboration with state governments.
Oyedele said CNG was 60 to 70 per cent cheaper than petrol. The government expects transport operators to reflect the cost difference in lower fares, although the extent of any savings passed on to passengers will depend on implementation and operating costs.
The government is also considering an excess profit tax targeting operators it believes are exploiting consumers across the energy value chain. According to the statement, proceeds would be used exclusively to cushion fuel price increases through transport support or vouchers for urban minimum wage earners. The proposal is under consideration and should not be understood as an enacted tax.
The Federal Government also plans to work with the National Assembly to consider enhanced tax relief for low income earners under the 2027 Finance Bill. Other measures under consideration include reducing regulatory costs that contribute to the prices of goods and services.
Another proposal is the establishment of a National Strategic Fuel Reserve. Under the plan, refined petroleum products would be released into the market under published rules when global disruptions or hoarding threatened supply and price stability.
The government said the reserve could help prevent artificial scarcity and market manipulation while strengthening energy security, without restoring fuel subsidies or fixing prices.
The statement also identified the newly launched address codes by the Nigerian Postal Service as a measure expected to improve logistics efficiency and reduce delivery costs.
The Presidency acknowledged the hardship Nigerians face following increases in petrol prices but maintained that restoring blanket subsidies would create longer term economic challenges.
“Removing the fuel subsidy came at a price. But the alternative has been tried.
“Nigeria has already lived through that cycle: scarcity, smuggling, a collapsing currency and a fiscal crisis,” the Presidency said.
It added that the government was working on a broader package of fiscal measures intended to reduce inflation sustainably to single digits in the near term.
THE ISSUES
- The 30 day NNPC Retail margin waiver removes the company’s retail profit margin from its selling price but does not eliminate the underlying cost of procuring petrol. The extent of relief will depend on the cost at which NNPC Retail obtains the product and whether other marketers adopt similar measures.
- The proposed N1,350 per litre ceiling concerns petrol’s ex gantry or landing cost, not a guaranteed price at filling stations. Its effect on retail prices will depend on the final terms, implementation and the costs incurred between landing or gantry sales and retail distribution.
- Forward crude sales are intended to reduce the immediate effect of global price movements and exchange rate changes on domestic refining costs. Under the proposed arrangement, however, some costs could be deferred rather than eliminated. The statement does not provide all the contractual details governing how deferred costs would be recovered.
- CNG adoption and targeted cash transfers could offer additional relief, but the outcome will depend on access, implementation and whether savings reach intended beneficiaries. The government’s estimate of CNG’s cost advantage does not, by itself, establish how much individual passengers will save on transport fares.
- The proposed excess profit tax and strategic fuel reserve require further details on implementation, oversight and eligibility. Their impact will depend on the final rules, including how excess profits are identified and when reserve supplies can be released.
WHAT’S BEING SAID
“This is neither a subsidy nor a price control: it is designed to smooth prices over time rather than suppressing them.” – Taiwo Oyedele, Minister of Finance and Coordinating Minister of the Economy
“Nigeria has already lived through that cycle: scarcity, smuggling, a collapsing currency and a fiscal crisis.” – The Presidency
WHAT’S NEXT
NNPC Retail’s margin waiver is scheduled to last 30 days. The government is still negotiating the proposed landing cost ceiling, while the excess profit tax, strategic fuel reserve and enhanced tax relief under the 2027 Finance Bill remain proposals or plans requiring further development. The government says the ceiling would be reviewed monthly if implemented.
BOTTOM LINE
The government is combining a temporary waiver of NNPC Retail’s profit margin with proposed measures to manage fuel costs and support vulnerable Nigerians. The extent of relief will depend on implementation, the final terms of the proposed ceiling and whether cost savings reach households and businesses.
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