Fuel price relief not return to subsidy regime – CPPE

The Centre for the Promotion of Private Enterprise (CPPE) has said the Nigerian Government’s fuel price relief initiative through the Nigerian National Petroleum Company Limited (NNPC) does not amount to a reversal of the fuel subsidy removal policy.

The centre described the intervention as a temporary response to an extraordinary global energy shock, not a return to the previous subsidy regime, which placed a significant financial burden on the government.

In a statement issued on Tuesday, Muda Yusuf, the CEO of the organisation, said attempts to portray the initiative as a policy reversal are misleading, noting that the recent spikes in petroleum product prices were primarily driven by geopolitical tensions that have shot global oil prices above $100 per barrel.

Mr Yusuf said the development represents an external shock affecting both oil-producing and oil-importing countries and is not peculiar to Nigeria.

“Economic policies are instruments for promoting citizens’ welfare; they should not become rigid doctrines that prevent governments from responding to exceptional social and economic difficulties,” he said.

The Nigerian Government recently announced a fuel price relief initiative, requiring the NNPC to forego its petrol retail profit margin and sell the product at landing cost to cushion the impact of rising global energy prices on Nigerians.

Opposition parties have repeatedly criticised the Tinubu administration for the hardship associated with subsidy removal and for failing to implement adequate measures to cushion its immediate impact when the president abolished fuel subsidies at his inauguration in May 2023.

The government has maintained that the fuel price relief initiative is a temporary intervention intended to moderate the effects of global price volatility rather than reverse the deregulation of the downstream petroleum sector.

The CPPE stated that governments could introduce temporary interventions to protect households and businesses during exceptional economic shocks without abandoning their broader economic policy frameworks.

Mr Yusuf observed that the scale and structure of the current intervention distinguish it from the former fuel subsidy arrangement.

According to him, the previous regime effectively required the government to incur a substantial portion of the cost of nationwide petrol consumption, estimated at between 50 million and 90 million litres daily.

He said the arrangement created enormous fiscal pressures, weakened public finances, crowded out development spending and fuelled macroeconomic instability.

Mr Yusuf said reported figures indicate the current intervention covered approximately 70 million litres of NNPC fuel supply monthly, compared with estimated national petrol consumption of 50 million litres daily.

He added that the initiative did not reinstate a government-administered national petrol price, impose a general subsidy obligation on private operators or dismantle the market-based petroleum pricing framework.

Restoring a broad-based petrol subsidy, the CPPE boss noted, will recreate fiscal vulnerabilities and distortions, particularly as Nigeria continues to grapple with infrastructure deficit, debt-servicing obligations and competing development priorities.

NNPC’s commercial mandate

The CPPE also argued that NNPC’s status as a commercial enterprise does not hinder the government from deploying its assets to address exceptional public-interest concerns.

Mr Yusuf said temporary interventions could be accommodated within an appropriate governance framework, provided they are transparent, proportionate, time-bound and financially sustainable.

He, however, warned that the government’s ownership should not justify an indefinite departure from commercial discipline.

“The objective should be to reconcile commercial sustainability with legitimate public-interest obligations, rather than present both as mutually exclusive,” he stated.

According to him, a limited fuel price relief initiative will not necessarily undermine the credibility of Nigeria’s economic reforms.

He said investors are more concerned about policy predictability, market access, commercial viability, fiscal sustainability and the protection of legitimate investments.

CPPE proposes broader relief measures

Despite welcoming the fuel price relief initiative, Mr Yusuf said its limited coverage means its overall impact on household welfare will also be limited.

He urged the federal and state governments to introduce broader measures to soften the blow of rising energy costs on transportation, food production and household expenditure.

He identified affordable mass transit as a priority, recommending investments in high-capacity buses powered by compressed natural gas, electricity and other economically viable energy sources.

According to him, subsidised public transportation could provide broader relief than limited petrol price discounts by reducing commuting costs for low-income workers, students and small business operators.

He added that such measures could also improve labour mobility, reduce operating costs for small enterprises and stimulate economic activity.

The CPPE further called for targeted support to improve agricultural productivity and food supply, noting that higher energy prices increase the costs of land preparation, irrigation, mechanisation, transportation, storage and food distribution.

Mr Yusuf urged the government to improve farmers’ access to fertilisers, agrochemicals, agricultural machinery and other productivity-enhancing inputs.

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He said reducing the cost of food production and distribution should take priority over relying predominantly on general consumption subsidies.

The centre also called on state and local governments to share the responsibility for cushioning the effects of the energy price shock.

It suggested that state governments consider discounted fuel outlets, subsidised public transportation and targeted assistance for vulnerable households, with clear eligibility criteria, transparent funding arrangements and safeguards against diversion.

Mr Yusuf urged the government to preserve market-based pricing, fair competition, transparent regulation and a trade policy framework that supports investment in domestic refining.

He maintained that removing the former petrol subsidy was a necessary structural reform that should not be abandoned.

“The priority should be to protect vulnerable citizens, preserve the sustainability of public finances and maintain the integrity of ongoing economic reforms,” he said.

He added that Nigeria needs a credible framework for temporary, targeted, and transparent social protection during exceptional economic shocks, rather than a return to what he described as a fiscally destructive subsidy regime.