IMPI defends Tinubu’s petrol price relief, faults Atiku’s subsidy proposal
0
0
IMPI defends Tinubu’s petrol price relief, faults Atiku’s subsidy proposal
By Alabidun Shuaib AbdulRahman
The Independent Media and Policy Initiative, IMPI has defended the Federal Government’s 30-day petrol price discount and forward crude sale arrangement, insisting that the measures do not amount to a return to fuel subsidy.
The policy think tank also faulted former Vice President Atiku Abubakar’s proposed production subsidy for local refineries, warning that the model could increase pressure on public finances and undermine investor confidence in Nigeria’s oil and gas industry.
In a policy statement signed by its Chairman, Dr Omoniyi Akinsiju, IMPI argued that the government’s intervention was designed to cushion the impact of global oil price volatility rather than restore the former fuel subsidy regime.
Atiku, the presidential candidate of the African Democratic Congress, had criticised the 30-day petrol price rebate, describing it as a panic-driven measure that would neither address structural inflation nor provide relief to motorists purchasing fuel outside Nigerian National Petroleum Company Limited retail outlets.
READ ALSO: TCN, AfDB provide classroom furniture to Kaduna pupils
However, IMPI said the former vice president’s criticism reflected an inadequate understanding of the policy, particularly given his previous commendation of Germany’s 90-day fuel discount model.
The group explained that the 30-day period was a controlled trial window that would enable the government to monitor market conditions, assess inflationary pressures and review the price mechanism before deciding on subsequent adjustments.
It said, “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.”
IMPI maintained that the arrangement differed fundamentally from the previous subsidy regime because it involved the NNPCL foregoing commercial retail profit margins rather than the government making direct payments to marketers from public funds.
According to the group, the distinction means the intervention would not automatically create additional public debt or expose the national treasury to the scale of expenditure associated with the former subsidy arrangement.
It also defended the proposed N1,350-per-litre ceiling on petrol landing costs, describing it as a price-smoothing mechanism rather than a permanent price control.
Under the arrangement, the group explained, petrol landing costs would be determined by international benchmarks, the naira exchange rate and domestic logistics expenses.
It said temporary differences between the calculated landing cost and the agreed ceiling could be absorbed by refiners and subsequently offset when market conditions improved.
IMPI added that the pricing framework would be reviewed every 30 days, with adjustments made if international crude oil prices or the exchange rate moved permanently into a different price range.
The group said the forward crude sale arrangement was intended to complement the immediate retail discount by providing greater predictability in crude supply and pricing for domestic refiners.
Comparing the Federal Government’s approach with Atiku’s proposal under his Atiku Economic Recovery Plan, IMPI said the two models represented different approaches to managing the downstream petroleum sector.
It explained that the government’s model relied on market-linked forward pricing and negotiated landing cost targets, while Atiku’s proposal envisaged a production subsidy in which the government would pay refinery owners the difference between their production costs and the prescribed price.
According to the group, the proposed subsidy would require explicit budgetary provisions and auditing, potentially placing additional demands on public resources.
IMPI further warned that requiring international oil companies and private joint-venture partners to supply crude oil at government-mandated discounts could trigger contractual disputes, discourage investment and expose the country to costly international arbitration.
It argued that selling crude oil below its economic value would also impose opportunity costs on the Federation Account.
The group added that uncertainty over crude pricing and government-imposed discounts could discourage international oil companies from committing funds to new exploration and production projects.
“History also shows that when emerging markets impose rigid domestic price caps on extractive resources, foreign capital avoids new licensing rounds,” Akinsiju said.
He argued that such policies could encourage international operators to redirect investment towards countries with more predictable commercial arrangements.
IMPI maintained that the government’s current approach was intended to balance short-term relief for consumers with the need to preserve market-based pricing and sustain investment in the petroleum sector.
The group said the effectiveness of the intervention would depend on periodic reviews of the pricing formula, market conditions and the ability of the forward sale arrangement to provide stability without creating unsustainable fiscal obligations.
