…says Nigeria risks N20tn annual bill if petrol subsidy returns
The Alliance for Economic Research and Ethics (AERE) has urged the Federal Government to establish a clear exit plan and improve public disclosure around the NNPC Retail petrol discount, warning that a return to blanket fuel subsidies could expose Nigeria to an annual bill exceeding N20 trillion.
The group said the N66-per-litre discount introduced by NNPC Retail on October 1 could provide limited relief to motorists amid rising fuel prices, but cautioned that the intervention must remain temporary, transparent and commercially accountable to avoid recreating the fiscal pressures associated with the former petrol subsidy regime.
In an analysis titled “The N66 Question — Relief Without Relapse: How to Cut Petrol Prices Without Rebuilding the Subsidy Monster,” AERE said the government must clearly explain the discount’s duration, cost, beneficiaries and conditions for any extension beyond its October 31 expiry date.
The group said the intervention was introduced as an Independence Day promotion and subsequently featured in the Federal Government’s response to rising fuel prices following disruptions in the global energy market.
Petrol prices, according to the analysis, have risen from about N830 per litre before the latest international oil market shock to approximately N1,400 in some locations, driven by higher crude oil prices, freight costs and disruptions to shipping through the Strait of Hormuz.
At N66 per litre, the discount represents about 4.7 percent of a N1,400 pump price, offering only modest relief to consumers facing higher transport and household expenses.
AERE noted that the discount was available at NNPC Retail outlets, but said checks conducted in Abuja on October 9 indicated that motorists making direct pump payments did not receive the reduction, with the discount reportedly operating through the NNPC Fuel App.
The group called on NNPC Retail to publish clear information on participating outlets, the volume of petrol sold under the scheme, the average discount granted and the effect on the company’s retail margins.
It also urged the government to explain how the intervention would be financed and whether reduced margins at the state-owned oil company could affect its commercial returns and contributions to public revenue.
“The government must now govern the experiment: keep the end-date real, publish the numbers, target direct support, expose the cost of any price-modulation deal, and accelerate the alternatives that reduce petrol dependence,” AERE noted
The Finance Ministry has said NNPC Retail purchases petrol at market prices and funds the discount by reducing its retail margin, rather than drawing directly from the Federal Budget or the Federation Account.
However, AERE said the use of a state-owned company’s commercial margin still requires accountability, particularly if the promotion is extended or expanded.
“The critical question is not whether N66 provides some relief, but whether the intervention is transparent, time-bound and fiscally responsible,” the group’s analysis indicated.
AERE warned that restoring petrol prices to pre-reform levels through a blanket subsidy could cost more than N20 trillion annually, based on the government’s estimates cited in the analysis.
The potential cost, it said, could rise further if subsidised prices encouraged higher consumption, cross-border smuggling and other forms of diversion.
The group therefore urged the government to avoid using a broad fuel subsidy as its main response to rising energy costs, arguing that assistance should instead be directed towards households and businesses most affected by the price shock.
It recommended targeted cash transfers, transport vouchers and support for public transportation as alternatives that could cushion the impact of higher petrol prices without reopening a large and poorly targeted subsidy commitment.
AERE also called for faster implementation of compressed natural gas (CNG) conversion programmes, enforcement against illegal charges in the petroleum supply chain and measures to improve domestic refining and fuel distribution.
The group said the government’s proposed use of forward crude sales to supply domestic refineries, alongside a strategic fuel reserve and reduced regulatory costs, could help strengthen supply resilience if supported by transparent implementation arrangements.
On the proposed petrol price-modulation mechanism, the analysis said discussions around a N1,350-per-litre ceiling on ex-gantry or landing costs required greater clarity.
Under the proposal, refiners and importers could absorb costs above the ceiling and recover them later when crude oil prices or exchange rates improve. AERE said the government must disclose the terms, potential costs, beneficiaries and recovery arrangements before the mechanism is implemented.
It also urged authorities to publish the proposed monthly reviews and explain how any losses absorbed by refiners or importers would be recovered, warning that unclear arrangements could create hidden liabilities.
The group said any relief measure should have a defined end date, measurable objectives and publicly disclosed conditions for renewal.
It recommended that the government publish weekly data on participating outlets, sales volumes, average discounts and the effect on NNPC Retail’s margins to enable the public to assess whether the intervention was delivering meaningful relief.
AERE said the broader priority should be to protect consumers from fuel-price shocks while maintaining the fiscal gains associated with the removal of the petrol subsidy.
The group argued that sustained relief would depend less on temporary pump-price reductions than on improved domestic supply, efficient distribution, targeted social protection and greater transparency in the petroleum market.
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