FG’s Petrol Discount Could Cost Nigeria N1.77tn

Nigeria’s petrol price relief package could cost the country up to N1.77tn, representing 0.4 per cent of its Gross Domestic Product, according to BMI, a research firm owned by Fitch Solutions.

In its latest report titled Fuel Discount Mechanism Raises Macro Risks in Nigeria, the firm warned that prolonged implementation of the intervention could worsen the country’s fiscal position, reduce government revenue and put additional pressure on the naira.

The report followed the Federal Government’s announcement of a 30-day petrol price intervention, under which Nigerian National Petroleum Company Limited retail outlets were directed to sell petrol at cost without profit margins. The government also proposed a wholesale price benchmark of N1,350 per litre.

Although the government described the measure as temporary, BMI projected that it could remain in place for about six months, potentially extending into the first quarter of 2027.

The firm warned that an extended intervention could reduce NNPC’s remittances to government accounts, increase borrowing pressures and weaken investor confidence. It also raised concerns that cheaper petrol could encourage cross-border smuggling, increase demand for foreign exchange and put further pressure on the naira.

BMI further cautioned that prolonged government intervention in petrol pricing could affect investment in the downstream petroleum sector, including the Dangote Refinery, and potentially undermine confidence in its planned initial public offering.

However, the report identified the proposed forward sale of crude oil to domestic refineries as a potentially beneficial measure for improving local fuel supply.

The Federal Government has maintained that the petrol discount is not a return to fuel subsidy, stating that the intervention is funded by NNPC Retail Limited’s decision to reduce its profit margin rather than through public funds.

BMI warned that allowing the temporary measure to become permanent could create a significant fiscal burden and pose risks to government revenue, economic stability and investor confidence.