The Independent Media and Policy Initiative (IMPI) has rejected claims that the Federal Government’s fuel price modulation measures amount to a return to petrol subsidy, insisting that the policy differs fundamentally from the subsidy restoration proposal of former Vice President Atiku Abubakar....
The Independent Media and Policy Initiative (IMPI) has rejected claims that the Federal Government’s fuel price modulation measures amount to a return to petrol subsidy, insisting that the policy differs fundamentally from the subsidy restoration proposal of former Vice President Atiku Abubakar.
The policy think tank said the 30-day fuel discount at Nigerian National Petroleum Company Limited (NNPCL) retail stations and the government’s price modulation plan were designed to cushion consumers against global oil price shocks without imposing the huge fiscal burden associated with the former subsidy regime.
In a policy statement signed by its Chairman, Dr Omoniyi Akinsiju, IMPI said Atiku’s criticism of the measures overlooked the distinction between a market-based price intervention and a government-funded production subsidy.
Atiku, the African Democratic Congress (ADC) presidential candidate, had criticised the 30-day fuel discount as a “panic-driven stunt”, arguing that the intervention would not address structural inflation or provide relief to motorists purchasing petrol outside NNPCL retail outlets.
However, IMPI described the government’s approach as a data-driven intervention intended to absorb sudden increases in international fuel prices.
“We believe this Atiku outlook is parochial and lacks a clear understanding of the policy as enunciated, even after he had earlier commended Germany’s 90-day, 17-cent fuel discount model,” the group said.
It argued that the 30-day period should be regarded as a controlled trial rather than a fixed expiration date, allowing the government to monitor inflationary pressures, supply-chain leakages and market conditions before adjusting or extending the intervention.
According to IMPI, the arrangement also allows authorities to review maximum gantry prices as economic conditions change.
The group maintained that the intervention did not constitute a subsidy because NNPCL was foregoing commercial retail profit margins to sell petrol at landing cost rather than receiving government payments to cover the difference between regulated prices and production costs.
“A traditional subsidy involves the government cutting direct cheques to marketers using public funds it does not have,” the statement said.
“This discount is structurally different as it is the NNPCL simply forgoing its commercial retail profit margins to sell petrol at landing cost. No new debt is created, and the national treasury remains insulated from a multi-trillion haemorrhage that would have been incurred under the Atiku crude oil discounted model.”
IMPI also clarified that the proposed ceiling of ₦1,350 per litre at the ex-gantry or landing-cost level should not be interpreted as a permanent price control.
Instead, it described the ceiling as a mechanism for smoothing price fluctuations over a 30-day period, subject to review.
IMPI Contrasts FG, Atiku models
The think tank said the Federal Government’s approach relied on market-linked forward pricing and local-currency arrangements, while Atiku’s proposal would involve a budgeted production subsidy for local refineries.
Under the government’s approach, IMPI said, crude oil would be priced using international market benchmarks, with currency conversion arrangements or negotiated landing-cost targets intended to moderate the effect of price volatility.
The group argued that the approach would treat the intervention as a reduction in commercial margins rather than a direct budgetary expenditure.
By contrast, it said Atiku’s proposal would require the government to pay refinery owners the difference between the relevant production cost and the supported price, subject to limits and auditing within the national budget.
IMPI warned that such an arrangement could impose significant costs on public finances by requiring crude oil to be supplied below its economic value.
It also questioned how the government would secure discounted crude from international oil companies (IOCs) and private joint-venture partners without risking contractual disputes, reduced investor confidence or costly international arbitration.
“Indeed, forcing IOCs operating in the Niger Delta to sell their joint-venture or Production Sharing Contract (PSC) oil streams at a state-mandated discount, under the Atiku model, would deeply fracture investors’ confidence,” the statement said.
The group further argued that imposing rigid domestic price controls on petroleum resources could discourage foreign investment, weaken exploration activities and divert capital to countries with more commercially attractive operating environments.
It said such developments could undermine efforts to increase domestic oil and gas production and attract investment into new projects.
Akinsiju added that the absence of final investment decisions on new oil and gas projects before the Tinubu administration reflected the challenges associated with Nigeria’s previous investment environment.
IMPI maintained that the two approaches represented different economic strategies, arguing that the Federal Government’s intervention was intended to provide temporary relief from global price shocks while preserving market-based pricing, whereas Atiku’s proposal would create a direct fiscal commitment through production subsidies.