By Stella Odueme
The Independent Media and Policy Initiative (IMPI) has dismissed claims that the Federal Government’s fuel price modulation measures amount to a return to subsidy, insisting that the policy differs significantly from the production subsidy proposed by former Vice President Atiku Abubakar.
Atiku, the presidential candidate of the African Democratic Congress (ADC), had criticised the government’s 30-day fuel discount at Nigerian National Petroleum Company Limited (NNPCL) retail outlets, describing it as a temporary measure that would not address structural inflation or provide relief to motorists purchasing petrol outside the company’s stations.
However, IMPI, in a policy statement signed by its Chairman, Dr Omoniyi Akinsiju, said the government’s intervention was designed to cushion the impact of rising global oil prices triggered by the Middle East conflict rather than revive the former fuel subsidy regime.
The policy group argued that the 30-day window was a controlled trial period that would enable the government to monitor market reactions, assess inflationary pressures and identify supply-chain leakages before reviewing or extending the measures.
According to IMPI, the policy also allows the government to adjust maximum gantry prices in response to changing market conditions.
It maintained that the arrangement was fundamentally different from a conventional fuel subsidy, under which the government uses public funds to compensate marketers for the difference between regulated prices and market costs.
“ A traditional subsidy involves the government cutting direct checks to marketers using public funds it does not have. This discount is structurally different as it is the NNPCL simply forgoing its commercial retail profit margins to sell petrol at landing cost,” the statement said.
IMPI added that the arrangement would not create new government debt or expose the national treasury to the substantial financial burden associated with a conventional subsidy programme.
The group also explained that the proposed ceiling of ₦1,350 per litre on petrol’s ex-gantry or landing cost should not be interpreted as a fixed price control.
Rather, it said the ceiling was part of a price-smoothing mechanism based on an economic formula that would be reviewed every 30 days.
Comparing the government's approach with Atiku’s proposal under the Atiku Economic Recovery Plan (AERP), IMPI said the two policies represented different approaches to managing Nigeria’s downstream petroleum sector.
It explained that the Federal Government’s model relied on market-linked forward pricing, under which crude oil would be sold to refiners using international market benchmarks, with adjustments through agreed naira exchange rates or negotiated landing-cost targets.
According to the group, the approach was intended to reduce currency-conversion uncertainties, secure future crude supplies and provide temporary relief through reduced commercial margins rather than direct budgetary expenditure.
In contrast, it said Atiku’s proposal involved a production subsidy under which the government would pay refinery owners the difference between the actual cost of production and a stipulated price, subject to budgetary provisions and auditing.
IMPI warned that such an arrangement could impose significant fiscal costs on the government by requiring crude oil to be supplied below its economic value.
The group also questioned how the government could compel international oil companies (IOCs) and private joint-venture partners to sell their equity crude at government-mandated discounts without triggering contractual disputes, investor withdrawals or costly international arbitration.
It argued that forcing operators to sell crude oil from joint ventures or production-sharing contracts at discounted rates could undermine investor confidence in Nigeria’s oil and gas industry.
According to IMPI, countries that impose rigid domestic price controls on extractive resources risk discouraging foreign investment, particularly in new exploration and licensing rounds.
The group further argued that such policies could prompt international operators to redirect deep-water exploration investments to countries with more favourable commercial conditions, leaving domestic oil fields underfunded.
Akinsiju maintained that the investment challenges associated with such an approach could undermine efforts to expand Nigeria’s oil and gas production, adding that the country had struggled to secure final investment decisions on new projects before the Tinubu administration.