The financial and mathematical breakdown of Tinubu's temporary fuel relief

Since President Bola Ahmed Tinubu announced the removal of fuel subsidy on May 29, 2023, Nigerians have been paying the full market price for petrol. So when the news broke within the week that the Federal Government will offer a 30-day discount on petrol sold by NNPC, with a priority for public transport operators, many asked: Is subsidy back?

The short answer: No, it is not subsidy return. It is a temporary targeted price reduction.

Let me explain what it means, the pros and cons, and why it may not solve the transport problem unless we fix the distribution gap.

What exactly is the new decision announced by the minister of finance?

According to the Minister of Finance, Taiwo Oyedele, the FG plans a 30-day discount window on NNPC-supplied petrol. The goal is to quickly reduce transport fares which have increased by over 300% since subsidy removal. According to Oyedele, it is not a return to the old subsidy regime where FG paid the difference for ALL petrol. This is NNPC selling below its current pump price for a limited period, possibly absorbing the loss or getting a rebate from FG.

The Pros

1. Immediate Relief:  If implemented well, commercial drivers who get the discount will pay less, and fares in Lagos, Abuja, Ondo, etc. could drop temporarily.

2. Anti-Inflation Signal: Transport cost drives food prices. A little drop can slow food inflation for a month.

3. Political Goodwill: It shows the government is listening after the NLC gave a 2-week ultimatum and Atiku called the economy "hardship economy."

4. Test Run for Targeted Subsidy: Instead of subsidizing for everyone including private car owners, you target only danfo, buses, keke. That is smarter.

Now, the Cons and the Real Problem

1. It is only 30 days. What next? Nigerians have seen "temporary relief" before. After 30 days, price jumps again and creates panic buying.

2. The NNPC Station Problem - This is the biggest issue.

Now, let's do the financial and mathematical analysis:

According to NMDPRA, Nigeria has 22,681 registered filling stations. NNPC Retail has just about 900 stations nationwide [that is about 4% of all stations].

In a typical city:

- Lagos State: IPMAN alone has ∼2,000 stations, MOMAN has ∼500, NNPC has ∼30. So NNPC is just 1.2% in Lagos.

- Take Ondo City where I stay and work: We have maybe 40-50 private stations (AP, MRS, Nipco, matrix, Total, Bovas, local stations) and only 2-3 NNPC stations on Akure Road and Ife Road.

If the discount is ONLY available at NNPC stations, how will it work? How will this now affect cost of living? Will transport fares still drop from the usual ₦500-₦1500 depending on distance and by how much based on the ₦15 relief for just 30 days? 

For a family that spends average of 60 litres of fuel for transportation to workplace and local runnings, at a cost of ₦1365/litre, such family spends ₦81,900 on monthly transportation outside the use of generator and other devices that require pms. Now, with the 30-day price relief, the family has only been relieved of ₦900 in a month which is grossly insignificant to the bulk of ₦81,000 readily spent. Thus, as much as this is appreciated, the financial implication seems insignificant and may not be able to translate to a general reduction of transportation cost to the common man. 

- Long queues will return at those few stations.

- Most danfo/taxi drivers and Okada riders in far away locations and suburb villages cannot drive 10km to queue 4 hours just to save ₦15 - ₦20 per litre relief.

- Private stations will still sell at full price, so passengers will still pay current high fare.

- It creates room for diversion and black market: Buy cheap at NNPC, resell to private stations.

So the plan can help, but it cannot solve the transportation problem because NNPC does not have the spread to reach the average transporter.

3. Trust Deficit: Many transporters believe NURTW leaders will hijack the discount and resell.

4. No Structural Fix: It does not address the root causes - low refining capacity, dollar-based pricing, bad roads, and over-reliance on 25,000 tankers for distribution.

How Do We Get Out of This Challenge? My Humble Suggestions

If FG really wants this 30-day plan to work and become sustainable, here is what should be done:

1. Expand Beyond NNPC Stations: Use the Dangote Refinery direct distribution model. Partner with IPMAN and MOMAN. Give them a code so registered public transport vehicles can buy at discount in ANY station, not just NNPC. Use NIN or Biometric Transport ID.

2. Use Technology, Not Paper: Create a simple Transport Wallet - driver loads NIN, vehicle number, and gets a QR code. When he buys fuel, the system automatically gives the discount. No middleman.

3. Invest in CNG and Buses: The real long-term solution is not cheap petrol, but an alternative. Lagos has started CNG buses. FG should accelerate the 90,000km fibre and CNG stations rollout promised, and give states like Ondo State CNG conversion centers.

4. Fix Local Refineries: Support Dangote and modular refineries to sell in Naira, not dollar. If we refine and sell locally, price will naturally drop without subsidy.

5. Make it Data-Driven: After 30 days, publish data - how many vehicles benefited, how much fare dropped, how much it cost FG. Then Nigerians can judge.

Conclusion

Temporary Relief or Return to Old Ways? President Tinubu's 30-day NNPC price adjustment is not a subsidy return, but a temporary palliative. It can reduce pain for one month, but it cannot fix a transport system where 96% of filling stations are outside the NNPC network.

If the government wants to avoid queues, black market, and disappointment, it must make the discount accessible where drivers actually buy fuel - in their own neighbourhood stations.

Otherwise, for the average Nigerian boarding a bus in Ondo, Akure, or Agege, nothing will change.

What do you think? Is a 30-day discount enough, or should FG invest that money in CNG buses instead or implement the suggested points? Drop your comment in the comment box.

_ Written by:

Adenegan Kehinde Emmmanuel,  PhD

Associate Professor. 

Numerical Analysis & Financial Mathematics Expert, IT Guru, Adeyemi Federal University of Education,  Ondo

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