Oil and gas expert Olabode Sowunmi has described the Nigerian National Petroleum Company Limited’s (NNPC) petrol discount as a business decision, arguing that it should not be classified as a subsidy.
Sowunmi made the remarks during an interview on ARISE News on Monday, following the Federal Government’s announcement of a 30-day petrol discount at NNPC filling stations nationwide.
“I’m not sure there’s really anything on the table that speaks to subsidy,” he said.
According to Sowunmi, the discount was initially introduced as part of the company’s business activities to mark Nigeria’s 66th Independence anniversary.
“If we recall, at the end of September, the NNPC made an announcement which basically was to promote an app for their business and to align with the independence. Nigeria was 66% on the 1st of October. So what they basically did was to do a 66 Naira discount on anybody making purchases from their filling station, which is basically a business decision by a company that is now limited in liability,” he said.
He argued that the discount was misinterpreted as a subsidy after it was announced alongside other government interventions intended to ease the impact of rising energy costs.
“I think, however, for some reason, when it was announced, along with the other bouquet of incentives that came out with helping ameliorate the circumstances we found ourselves, it was announced as one of them,” he said.
“So how that got misinterpreted as subsidy and the whole thing just speaks to the fact that maybe a lot of the fundamentals has not been understood by those reporting it. That would be my submission on that.”
Sowunmi maintained that the discount should be viewed as a commercial decision by NNPC rather than a government policy affecting the entire downstream petroleum sector.
“I’m not sure it’s a policy. I think it was a business decision,” he said.
“So because a policy, by definition and by what it is, is a government thought-out process that affects all players. But this is a decision by one single player related to achieving something within their own goals.”
He compared the discount to promotional offers by telecommunications companies, arguing that businesses introduce such measures to achieve their commercial objectives without requiring competitors to adopt similar strategies.
“So basically, Econet or Vmobile, as we knew them back in the day, they used to have buy one, get one free. That was a business decision,” he said.
“It was not supposed to alter Glo’s plan, nor was it supposed to affect MTN’s plan. So businesses do those kind of things as calculated efforts to reach their businesses.”
Sowunmi also argued that NNPC’s ownership structure did not automatically make every decision by the company a decision of the Federal Government.
“And to the extent that NNPC is a limited liability company, they can make some decisions as an organ of themselves. It is simplistic to assume that any decision made by anything connected with government is a decision of the federal government. And that is where the difference lies,” he said.
On the question of who bears the cost of the discount, Sowunmi said the financial gap associated with a subsidy was a key factor in determining whether an intervention qualified as one.
“When something becomes a subsidy, is basically, I mean government subsidy in this case, is basically when the gap between the total cost and the cost that is being sold, when that gap is being borne by government, that is when it becomes subsidy,” he said.
“In the case of the discount that has been announced, it is borne by NNPC. So that cannot be.”
The Federal Government had announced a series of measures to cushion the impact of rising petrol prices and global energy costs, including the 30-day discount at NNPC filling stations, with public transport operators expected to receive priority.
Faridah Abdulkadiri
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