POLICY STATEMENT 045 ISSUED BY THE INDEPENDENT MEDIA AND POLICY INITIATIVE (IMPI)
FUEL PRICE REDUCTION STRATEGY: A COMPARATIVE ANALYSIS OF FG AND ATIKU’S MODELS
The nation’s public space has become a molten furnace of heated claims and counterclaims following the NNPC’s recent introduction of a 30-day petrol retail discount and a Federal Government crude oil forward sales arrangement to mitigate fuel pricing and, by extension, the cost of living.
Indeed, we have particularly observed the deliberate obfuscation of the essence and intent of the policies by Alhaji Atiku Abubakar, the presidential candidate of the African Democratic Congress (ADC).
Expectedly, despite strenuous explanations by the Minister of Finance and Coordinating Minister of the Economy, Mr Taiwo Oyedele, this has continued to agitate some sections of the media and the public.
Thus, there is a need to further engage the public space with highlights of the policy rollout and a comparative analysis of Atiku’s pronouncements on his subsidy restoration promise.
We, however, cannot qualify his position as a policy because he has refused to provide the sinews and theoretical tendons that will hold his subsidy restoration promise together.
Context and Strategy of the Government’s Intervention
The 30-day profit rebate policy of the Nigerian National Petroleum Company Limited (NNPCL) was initiated against a backdrop of inflationary pressures, with global Brent crude price surging above $100 per barrel due to geopolitical conflicts. Because domestic fuel prices remain exposed to global market shifts, the administration deployed two major tools to protect households without draining the national treasury.
NNPCL will now sell fuel at landing cost (foregoing profit) to provide immediate, short-term relief to Nigerians. However, it will prioritise public transport operators to prevent commuter fares and food logistics costs from rising in a cascade. This is separate from the crude oil forward sales arrangement meant to facilitate mid-term stability (e.g., selling crude to local refiners at a predetermined rate for six months). This protects domestic refineries from international price spikes and provides consumers with a more predictable pricing environment.
A Bridge to Structural Mid-Term Solutions
A common critique from Atiku Abubakar is that a short-term discount offers no permanent relief. However, the 30-day rebate does not exist in a vacuum. It provides immediate fiscal relief while mid-term structural solutions mature.
Specifically, the simultaneous deployment of crude oil forward sales to domestic refiners, which locks in lower fixed rates over 6 months and a negotiated landing cost/gantry price of N1,350 per litre of petrol, requires time to detach domestic pump prices from erratic global market swings systematically. The 30 days protect citizens now while the government finalises forward-sales contracts.
Critics also argue that the discount is too small or inaccessible to regular motorists. We understand the policy strategically targets public transporters nationwide. By prioritising commercial transport, the intervention prevents a cascading “multiplier effect”—where high logistics costs rapidly drive up the prices of food, staple commodities, and everyday commutes for lower-income families.
The Crude Oil Forward-Sale Strategy
From our perspective, the Federal Government’s strategy of selling crude oil via forward sales specifically to domestic refineries is a macroeconomic stabilisation tool. The policy commits the government to deliver specified quantities of crude oil to refineries at a predetermined price over a future timeline. By using forward sales, the government lets domestic refiners lock in feedstock prices well in advance. This insulates them from sudden spikes in global crude prices, ensuring predictable operating costs and a steady, uninterrupted supply of crude oil.
This arrangement supports broader consumer relief programmes, such as negotiating a landing cost ceiling for petrol at ₦1,350 per litre. Thus, when international crude prices surge, forward contracts ensure the cost of crude entering local refineries does not spike at the same time. This helps prevent erratic, aggressive price shocks at the fuel pump for Nigerian citizens.
In addition, domestic refineries often face severe currency mismatches when they must buy crude oil in US dollars but sell refined products locally in Naira, so forward agreements smooth these exchange-rate exposures.
While forward sales can sometimes limit immediate cash-flow liquidity if global crude prices rise, they give the government highly predictable volumes of guaranteed local economic activity.
Direct Comparison: Government’s Strategy vs Atiku’s Proposal
In his attack on the 30-day fuel price rebate policy, Atiku labelled it a “panic-driven stunt” timed around political cycles. He argues that a 30-day window fails to address structural inflation and doesn’t clarify how motorists buying outside NNPCL stations will get relief.
We believe this Atiku outlook is parochial and shows a limited understanding of the policy as enunciated, even after he earlier commended Germany’s 90-day, 17 cent fuel discount model.
Our position is that the policy is an agile, data-driven intervention designed to act as a shock absorber against a severe global price spike, rather than a return to a broken subsidy system.
The policy thrust is clear: it is not a 30-day “expiration date” but a controlled trial period. Modern macroeconomic management requires short-term, iterative policy windows to monitor market impacts on inflation, prevent immediate household panic, and track supply-chain leakages before extending or adjusting parameters. It allows the government to dynamically review maximum gantry prices.
And neither is it a form of subsidy, as Atiku and opponents of the policy are insisting that the administration is “bringing back subsidies through the backdoor.”
A traditional subsidy involves the government cutting direct checks to marketers using public funds it does not have. This discount is structurally different because NNPCL is 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.
How the ₦1,350 Landing Cost Ceiling is Reviewed
The ₦1,350 per litre ceiling on the ex-gantry or landing cost of petrol is not a frozen price control. Instead, it functions as a dynamic month-smoothing mechanism calculated using a strict economic formula and reviewed every 30 days.
The formula is as follows: N1,350 landing cost equals Platts (the global benchmark) multiplied by the Naira exchange rate, plus local logistics & port fees.
Every 30 days, the Ministry of Finance, NNPCL, and local refiners audit the actual averages of these inputs. The review operates on stabilisation fund logic highlighted as follows:
The Deficit Buffer: If a geopolitical shock, as seen with the conflict in the Strait of Hormuz, spikes international crude prices or weakens the Naira, pushing the mathematical landing cost to ₦1,450, the refiners temporarily absorb the ₦ 100 deficit under the stabilisation framework.
The Recovery Phase: When global prices drop and the actual landing cost falls to ₦1,250, the retail price remains at the ₦1,350 ceiling. Refiners automatically harvest the ₦ 100 surplus to offset the previous month’s deferred deficit.
The Recalibration Triggers: If the exchange rate or global crude moves permanently into a new price band over the 30 days, the steering committee will mathematically recalibrate the next month’s baseline ceiling (e.g., shifting it to ₦1,380 or ₦1,300 as the case may be) to ensure the system remains self-funding and does not draw from the treasury.
Operational Margin Disbursals: To lower the entry baseline, NNPC Retail has temporarily structured its business models to forgo profit margins while dispensing petrol at baseline cost to cushion commercial transport operators.
Comparing the Federal Government’s active forward sale and local currency pricing mechanism with Atiku Abubakar’s alternative petroleum plan (part of the Atiku Economic Recovery Plan, AERP) highlights two fundamentally distinct economic pathways for managing Nigeria’s downstream sector.
While the current administration uses a market-driven model, Atiku proposes a fiscally funded production-subsidy model.
In the FG model, the price mechanism is set on a market-linked forward pricing in which crude is sold to refiners based on international market benchmarks but converted at fixed Naira rates or pre-negotiated landing cost targets (e.g., capping petrol around ₦1,350/litre). This strategy smooths currency-conversion mismatches and secures future volumes. It treats interventions as margin discounts rather than a direct budgetary expense.
The opposite is the Atiku model, which treats the price gap as a “production subsidy”. The government pays the difference to refinery owners, with the amount explicitly capped and audited in the national annual budget.
Our analysis indicates that Atiku’s proposed model introduces a major fiscal drain disguised as industrial support. Supplying crude below its true economic value imposes a heavy opportunity cost on the Federation Account. Furthermore, we wonder how an administration could compel international oil companies (IOCs) and private joint-venture partners to sell their equity crude at government-mandated discounts without triggering serious contract breaches, investor flight, 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 severely undermine investor confidence.
History also shows that when emerging markets impose rigid domestic price caps on extractive resources, foreign capital avoids new licensing rounds. Rather than expanding production, global operators tend to divert their deep-water exploration budgets to more market-friendly environments, leaving local fields underfunded and structurally stagnant. This is why Nigeria did not record Final Investment Decisions (FIDs) on new oil and gas projects until President Tinubu’s administration.
Directly related, when a government forces a product to sell below its true economic value, it creates artificial shortages and black markets. This contrasts with the forward sales strategy, which uses commercial smoothing to ensure a steady, legal, and predictable flow of feedstock to local refineries without distorting supplies.
Why the Forward Sales Measure Falls Outside the Subsidy Classification Model
Cost-Recovery Pricing (Zero-Profit Retailing): NNPC Limited is to dispense petrol at its actual landing cost. Selling at cost without taking a commercial markup is a business margin adjustment, not a government subsidy.
No Cash Outlay or Public Debt
Accumulation: Unlike the pre-2023 fuel subsidy regime, the government treasury makes no direct budget disbursements or sovereign debt issuances to cover price differentials.
Commercial Risk Management: The forward sale of crude is an arm’s-length commercial arrangement structured around delivery timelines and foreign exchange stability, rather than off-market price suppression.
Price-Smoothing vs Price Suppression:
Subsidies distort structural market fundamentals over the long term, while the FG’s short-term price-smoothing measure temporarily caps extreme external volatility and preserves a fully deregulated market structure.
Zero Debt Accumulation: Because price modulation requires market players to absorb shortfalls independently, it eliminates the creation of new public deficit lines or massive domestic debts.
Preservation of Capital: Freed-up capital from previous subsidy allocations has allowed the federation to expand statutory allocations to states, direct revenues to targeted infrastructure, and buffer gross foreign reserves. This structural shift safeguards state balance sheets against macro shocks from commodity cycles. The Atiku production subsidy model could easily erode these significant economic gains.
We reiterate here that the 30-day NNPC retail price discount is part of a broader macroeconomic response designed by the FG to systematically drive down domestic energy costs without returning to a fiscal deficit.
Here is the breakdown of the nine complementary cushioning measures and how the ₦1,350 landing cost ceiling is mathematically established.
The Nine Complementary Cushioning Measures
These initiatives, as announced by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, aim to provide structural, non-inflationary reliefs to the economy.
Zero VAT on Petroleum and Gas: Immediately remove the 7.5% Value Added Tax (VAT) on locally refined petroleum products, diesel, LPG (cooking gas), and CNG equipment to eliminate non-operational costs.
Port Fee Reductions & Waivers: Shippers and importers of energy-related machinery receive deep discounts on NPA (Nigerian Ports Authority) and NIMASA charges to fast-track supply lines.
Accelerated CNG Infrastructure Rollout:
Direct fiscal funding to convert commercial public transit vehicles to Compressed Natural Gas (CNG) nationwide, offering drivers an alternative fuel source at roughly ₦230 per standard cubic meter.
Import Duty Waivers on Electric Vehicles & CNG Kits: A comprehensive 0% customs duty waiver on all imported conversion kits, electric vehicle batteries, and public transit CNG buses.
Exemption of Small Businesses from WHT: Elimination of withholding tax (WHT) for low-income transport unions, small-scale logistics operators, and local agricultural distributors to improve their immediate cash flow.
Special Agricultural Haulage Corridors: Collaboration with state governments to remove illegal bottlenecks and multiple tax points along interstate highways, lowering the food transport cost index.
Local Currency FX Anchoring for Refineries: Ensure domestic refiners can consistently access foreign exchange or buy crude feedstock in Naira at predictable, stabilised exchange rates.
Strategic Fuel Reserve Release: Mandate NNPCL to optimise national storage depots and inject immediate product liquidity into areas experiencing temporary artificial shortages.
Enhanced Cross-Border Enforcement:
Deploy advanced electronic tracking and customs intelligence to ensure fuel sold under this margin-free regime is not illegally smuggled into neighbouring West African countries.
Policy Conclusion
We maintain that the Federal Government’s targeted interventions, when strictly executed as cost-recovery pricing, forward market hedging, and supply stabilisation, serve as legitimate macro-prudential tools. They protect lower-income households and stabilise consumer prices without weakening sovereign credit ratings, depleting foreign reserves, or returning to the fiscal burden of fuel subsidies.
Conversely, the Atiku model portends a threat to the ongoing momentum in the national economy by its announced commitment to reverse the subsidy removal policy, which is indicative of a commonplace approach to policy conception and framing. Without doubt, it will starve Nigeria of the resources to drive growth and development across the three tiers of government.
Omoniyi M. Akinsiju, PhD
Chairman,
Independent Media and Policy Initiative (IMPI)
October 2026
