By Mary Izuaka

 

The Centre for the Promotion of Private Enterprise (CPPE) has said the federal government’s recent fuel price relief initiative through the Nigerian National Petroleum Company Limited (NNPC Ltd) does not amount to a return to the petroleum subsidy regime.

The centre said attempts to characterise the initiative as a reversal of the subsidy removal policy are misleading and fail to distinguish between a fundamental policy reversal and a temporary intervention in response to an extraordinary economic shock.

Last Thursday, the federal government introduced a 30-day petrol discount scheme to reduce transportation costs and ease the economic burden on Nigerians.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, who announced the initiative, explained that the scheme would cover petrol supplied by the NNPC Ltd, with public transport operators identified as priority beneficiaries.

In a policy brief issued on Tuesday and signed by its Chief Executive Officer, Muda Yusuf, the CPPE explained that the current escalation in petroleum product prices is driven principally by developments in the global energy market, particularly geopolitical tensions that have pushed crude oil prices above $100 per barrel.

According to the body, the escalation is an external shock affecting both oil-producing and oil-importing economies and is neither a consequence of Nigeria’s subsidy removal policy nor peculiar to the Nigerian economy.

“Extraordinary economic circumstances sometimes require exceptional policy responses. Governments across the world have historically intervened to cushion households and businesses against severe external shocks without abandoning their underlying economic management philosophy and framework,” Mr Yusuf said.

He noted that the COVID-19 pandemic provided compelling evidence of this approach, even in advanced market economies, stressing that economic policies should not become rigid doctrines that prevent governments from responding to exceptional difficulties.

Scale distinguishes relief from subsidy

The CPPE said the distinction between the previous subsidy regime and the current intervention becomes evident when their scales are examined.

It explained that under the former subsidy arrangement, the government effectively carried a substantial fiscal burden on nationwide petrol consumption, estimated at between 50 million and 90 million litres daily.

Mr Yusuf said the arrangement created enormous fiscal pressures, weakened public finances, crowded out development spending and contributed to macroeconomic instability.

“By contrast, according to reported figures, the current intervention covers approximately 70 million litres of NNPC fuel supply monthly, compared with estimated national petrol consumption of 50 million litres daily.

“More importantly, the intervention does not reinstate an administered national petrol price, impose a general subsidy obligation on private operators or dismantle the market-oriented framework for petroleum product pricing,” the CPPE said.

On public interest and NNPC’s commercial mandate, the CPPE said the commercial status of NNPC does not eliminate the government’s responsibility to respond to exceptional public-interest considerations.

It noted that NNPC remains a government-owned commercial enterprise with a diversified portfolio of petroleum-related businesses, and while its commercial mandate should ordinarily guide its operations, temporary and clearly defined public-interest interventions can be accommodated within an appropriate governance framework.

“The critical consideration is that such interventions must be transparent, proportionate, time-bound and financially sustainable,” it stated, adding that government ownership creates an opportunity to deploy public assets strategically in exceptional circumstances but does not justify an indefinite departure from commercial discipline.

Reform credibility

The CPPE maintained that the removal of the previous petroleum subsidy was a necessary structural reform, warning that reinstating a broad-based consumption subsidy would recreate serious fiscal vulnerabilities and distortions and would be fiscally unsustainable in an economy facing substantial infrastructure deficits, debt-service commitments and competing development priorities.

It, however, said a limited and temporary intervention should not automatically be interpreted as a deterioration in policy credibility, noting that investors are principally concerned about policy predictability, market access, commercial viability, fiscal sustainability and protection of legitimate investments.

“These fundamentals need not be compromised by a narrowly targeted emergency relief measure.

“The private sector remains the dominant participant in the downstream petroleum market. Provided that the government does not impose commercially unviable prices, discriminate against private operators or introduce distortive market restrictions, the current initiative need not undermine investor confidence,” Mr Yusuf said.

Beyond fuel discounts

The centre said while the proposed relief is welcome, its limited coverage means its aggregate impact on household welfare will also be limited, and urged the broader interventions that address the principal channels through which the energy price shock affects citizens.

It listed scaling up affordable mass transit, including high-capacity buses powered by CNG, electric and other viable alternatives, as a priority, saying targeted investment in heavily subsidised public transportation would deliver broader benefits than limited petrol price discounts.

“By reducing commuting costs for millions of citizens, particularly low-income workers, students and small business operators, such interventions would provide more inclusive relief and protect household purchasing power.

“They would also improve labour mobility, reduce operating costs for small enterprises and stimulate economic activity,” he said.

The CPPE also called for support for agricultural productivity and food supply.

“The government should provide targeted support for access to fertilisers, agrochemicals, agricultural machinery and other productivity-enhancing inputs.

“The priority should be to reduce the cost of food production and distribution rather than rely predominantly on general consumption subsidies.”

The CPPE further urged the federal government to strengthen state and local government interventions.

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He stated that the burden of responding to the current economic shock should not rest exclusively on the federal government.

“State governments have significant responsibilities for public transportation, education, healthcare, agricultural development and local economic welfare.

“States could consider designated discounted fuel outlets, subsidised public transport and targeted support for vulnerable households. Such programmes must have clear eligibility rules, a time frame, transparent funding and safeguards against diversion,” he said.

The CPPE also called for the protection of petroleum market reforms through sustained market-based pricing, fair competition, transparent regulation and a trade policy framework that supports domestic refining investment.

“CPPE’s position is that the current fuel price relief initiative should be understood as a limited response to an extraordinary global energy shock, not a reversal of the policy on petroleum subsidy removal.

“The intervention is substantially different in scale, design and potential fiscal implications from the previous subsidy regime. Its temporary character and limited market coverage are important distinctions. The priority should be to protect vulnerable citizens, preserve the sustainability of public finances and maintain the integrity of ongoing economic reforms.

“Nigeria does not need a return to the fiscally destructive subsidy regime. What it needs is a credible framework for temporary, targeted and transparent social protection during exceptional economic shocks.

“The current global energy crisis demands pragmatic policy responses, not ideological rigidity. Economic reforms must remain sustainable, but they must also be responsive to the welfare of the people,” he said.