…Tasks States On Similar Transport-fare Relief Measures
As the raging controversies in public discourse on the Federal Government’s approval to the Nigerian National Petroleum Company Limited (NNPCL) authorizing the company to sell fuel at discounted price to consumers remain unabated, the Centre for the Promotion of Private Enterprise (CPPE) has flawed the opposition to the fiscal measure, saying it is desirable for mitigating the negative impact of the global energy shock on the citizenry.
The organized private sector (OPS) advocacy group, in a Policy Note signed by its Director/Chief Executive, Dr. Muda Yusuf, maintained 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 group expressed its concern about attempts to characterise the Federal Government’s recent fuel price relief initiative through the Nigerian National Petroleum Company Limited (NNPC) as a reversal of the petroleum subsidy removal policy, noting that such an interpretation is misleading and fails to distinguish between a fundamental policy reversal and a temporary intervention in response to an extraordinary economic shock.
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Justifying its stance on the fuel pricing regime generally, the Centre noted that the current escalation in petroleum product prices was driven principally by developments in the global energy market, particularly geopolitical tensions that have pushed crude oil prices above $100 per barrel, representing an external shock affecting both oil-producing and oil-importing economies and neither a consequence of Nigeria’s subsidy removal policy nor peculiar to the Nigerian economy.
It pointed out that extraordinary economic circumstances sometimes required 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, recalling that COVID-19 pandemic provided compelling evidence of this approach, even in advanced market economies.
The OPS group described economic policies as instruments for promoting citizens’ welfare; they should not become rigid doctrines that prevent governments from responding to exceptional social and economic difficulties.
Distinguishing between the former administration and current one’s fuel subsidy measures, the CPPE stated that the distinction between the previous subsidy regime and the current intervention became particularly evident when their respective scales are examined.
It clarified that under the former subsidy arrangement, government effectively carried a substantial fiscal burden on nationwide petrol consumption, estimated at various times at between 50 million and 90 million litres daily, and that the arrangement created enormous fiscal pressures, weakened public finances, crowded out development spending and contributed to macroeconomic instability.
It noted that by contrast, according to reported figures, the current intervention covered approximately 70 million litres of NNPC fuel supply monthly, compared with estimated national petrol consumption of 50 million litres daily.
The Centre stated that more importantly, the latest intervention did 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.
On public interest and NNPC’s commercial mandate, the OPS group stated that the commercial status of NNPC did not eliminate the government’s responsibility to respond to exceptional public-interest considerations, adding that NNPC remains a government-owned commercial enterprise with a diversified portfolio of petroleum-related businesses and that its commercial mandate should ordinarily guide its operations.
It maintained, however, that temporary and clearly defined public-interest interventions can be accommodated within an appropriate governance framework.
The Centre stressed: “The critical consideration is that such interventions must be transparent, proportionate, time-bound and financially sustainable. Government ownership creates an opportunity to deploy public assets strategically in exceptional circumstances. It does not, however, justify an indefinite departure from commercial discipline. The objective should be to reconcile commercial sustainability with legitimate public-interest obligations, rather than present both as mutually exclusive.”
The CPPE maintained that the removal of the previous petroleum subsidy was a necessary structural reform and that reinstating a broad-based consumption subsidy would recreate serious fiscal vulnerabilities and consequential distortions in the economy, as such an obligation would be fiscally unsustainable, especially in an economy facing substantial infrastructure deficits, debt-service commitments and competing development priorities.
However, it clarified that a limited and temporary intervention should not automatically be interpreted as a deterioration in policy credibility as investors are principally concerned about policy predictability, market access, commercial viability, fiscal sustainability and the protection of legitimate investments, hence these fundamentals need not be compromised by a narrowly targeted emergency relief measure.
This is even as it noted that the private sector remained the dominant participant in the downstream petroleum market, stressing that provided that government does not impose commercially unviable prices, discriminate against private operators or introduce distortive market restrictions, the current initiative need not undermine investor confidence.
On the need to address the wider social costs, the Centre maintained that while the proposed fuel price relief is welcome, its limited coverage means that its aggregate impact on household welfare will also be limited, government should, therefore, pursue broader interventions that address the principal channels through which the energy price shock affects citizens.
To achieve this, it maintained that first, governments should scale up affordable mass transit as transportation is one of the most immediate transmission channels of higher energy prices to household expenditure and business operating costs.
Specifically, it canvassed that the federal and state governments should prioritise high-capacity buses, including CNG, electric and other economically viable alternatives.
The OPS group explained: “Targeted investment in heavily subsidised public transportation would deliver broader economic and social 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.
“Second, support agricultural productivity and food supply. Rising energy costs increase the cost of land preparation, irrigation, mechanisation, transportation, storage and food distribution. 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.
“Third, strengthen state and local government interventions. 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.
“Fourth, protect the integrity of petroleum market reforms. Government should sustain market-based pricing, fair competition, transparent regulation and a trade policy framework that supports domestic refining investment”, it added.
The CPPE noted that the intervention remained substantially different in scale, design and potential fiscal implications from the previous subsidy regime, adding that its temporary character and limited market coverage are important distinctions.
It stressed that the priority should be to protect vulnerable citizens, preserve the sustainability of public finances and maintain the integrity of ongoing economic reforms as Nigeria does not need a return to the fiscally destructive subsidy regime but needs only a credible framework for temporary, targeted and transparent social protection during exceptional economic shocks.
The Centre stated that the current global energy crisis demanded pragmatic policy responses, not ideological rigidity, and that “economic reforms must remain sustainable, but they must also be responsive to the welfare of the people.
