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No Return to Petrol, Power Subsidy - Federal Govt


Government on Monday stamped a note of finality on the removal of subsidy on petrol.

It said the adjustment of tariff on electricity is driven by the need to guarantee efficiency in power supply.

The price of petrol went up from N138.63 to between N162 and N164 per litre last week after the September price modulation.

Power Distribution Companies (DisCos) also adjusted the tariffs.

Nigerians have been lamenting the payment of high rates in the two sectors which are central to their lives.

President Muhammadu Buhari and three ministers at separate fora rose in defence of the decision to end the subsidy regime.

The President spoke through Vice President Yemi Osinbajo at the retreat for ministers. Three ministers – Lai Mohammed (Information), Timipre Sylva (Petroleum State) and Saleh Mohammed (Power) – spoke at a news conference.

The government also listed some of the measures put in place to prevent Nigerians from being cheated and how to ameliorate the harsh effects of the increased rates.

Buhari said having lost 60 per cent of revenue due to the effects of Coronavirus Pandemic, the government had no alternative than to do away with petrol subsidy which it could no longer afford.

The minister of Information puts the amount expanded on petrol subsidy in 13 years at N10.41 trillion.

He added that the Buhari administration expended N1.7 trillion to supplement electricity tariffs shortfalls.

Describing the new price regime in the sectors as “painful”, Mohammed said the government “will not inflict hardship” on Nigerians and promised that “brighter and more prosperous days will come soon.”

He added: “The government can no longer afford to subsidize petrol prices because of its many negative consequences. These include a return to the costly subsidy regime. With 60% less revenues today, we cannot afford the cost.

“The second danger is the potential return of fuel queues – which has, thankfully, become a thing of the past under this administration. The days in which Nigerians queue for hours and days just to buy petrol, often at very high prices, are gone for good. Of course, there is also no provision for fuel subsidy in the revised 2020 budget because we just cannot afford it.

Cost of Subsidy

“The cost of fuel subsidy is too high and unsustainable. From 2006 to 2019, fuel subsidy gulped N10.413trillion. That is an average of N743.8 billion per annum. “According to figures provided by the NNPC, the breakdown of the 14-year subsidy is as follows: 2006 (N257b); 2007 (N272b); 2008 (N631b); 2009 (N469b); 2010 (N667b); 2011 (N 2.105tn); 2012 (N1.355tn); 2013 (N1.316tn);2014 (N1.217tn); 2015 (N654b); 2016 (Figure Not Available); 2017 (N144.3b); 2018 (N730.86b) and 2019 (N595b).”

He said although the removal of subsidy will come with pains, the government will do its best to mitigate it.

He added: “The Federal Government is not unmindful of the pains associated with higher fuel prices at this time. That is why we will continue to seek ways to cushion the pains, especially for the most vulnerable Nigerians. The government is providing cheaper and more efficient fuel in form of auto gas.

“Also, the government, through the PPPRA, will ensure that marketers do not exploit citizens through arbitrarily hike in pump prices. And that is why the PPPRA announced the range of prices that must not be exceeded by marketers.

He gave insights into options weighed by the government before deciding to withdraw the subsidy.

He said with 60 per cent drop in revenues, the government could no longer sustain fuel subsidy.

Mohammed said: ”As you are aware, the long-drawn fuel subsidy regime ended in March 2020, when the Petroleum Products Pricing Regulatory Agency (PPPRA) announced that it had begun fuel price modulation, in accordance with prevailing market dynamics, and would respond appropriately to any further oil market development.

“Recall that the price of fuel then dropped from N145 to N125 per litre, and then to between N121.50 and N123.50 per litre in May.

“With the low price of crude oil then, the cost of petrol, which is a derivative of crude oil, fell, and the lower pump price was passed on to the consumers to enjoy.

“With the price of crude inching up, the price of petrol locally is also bound to increase, hence the latest price of N162 per litre.

“If, perchance, the price of crude drops again, the price of petrol will also drop, and the benefits will also be passed on to the consumers. The angry reactions that have greeted the latest prices of Premium Motor Spirit (PMS) are therefore unnecessary and totally mischievous.

“The truth of the matter is that subsidizing fuel is no longer feasible, especially under the prevailing economic conditions in the country. The government can no longer afford fuel subsidy, as revenues and foreign exchange earnings have fallen by almost 60%, due to the downturn in the fortunes of the oil sector.

“Yet, the government has had to sustain expenditures, especially on salaries and capital projects. Even though we have acted to mitigate the effect of the economic slowdown by adopting an Economic Sustainability Plan, we have also had to take some difficult decisions to stop unsustainable practices that were weighing the economy down.

Deregulation of prices

“One of such difficult decisions, which we took at the beginning of the COVID-19 pandemic in March – when oil prices collapsed at the height of the global lockdown – was the deregulation of the prices of PMS.

“As I said earlier, the benefit of lower prices at that time was passed to consumers. Everyone welcomed the lower fuel price then.

“Again, the effect of deregulation is that PMS prices will change with changes in global oil prices. This means quite regrettably that as oil prices recover, there will be some increases in PMS prices.  This is what has happened now.

Armed with statistics, the Minister said the price of fuel at N162 per litre is still the cheapest West/Central African sub-regions.”

He said: In spite of the recent increase in the price of fuel to N162 per litre, petrol prices in Nigeria remain the lowest in the West/Central African sub-regions. Below is a comparative analysis of petrol prices in the sub-regions (Naira equivalent per litre);

Nigeria (N162); Ghana (N332); Benin (N359); Togo (N300); Niger (N346); Chad (N366); Cameroon (N449); Burkina Fas( N433); Mali (N476); Liberia (N257);

Sierra Leone (N 281); Guinea (N363); and Senegal (N549).

“Outside the sub-region, petrol sells for N211 per litre in Egypt and N168 per litre in Saudi Arabia. You can now see that even with the removal of subsidy, fuel price in Nigeria remains among the cheapest in Africa.

On electricity tariff, the Minister said to keep the industry going, the government has so far spent almost N1.7 trillion, especially by way of supplementing tariffs shortfalls,

He said borrowing to subsidize generation and distribution, which are both privatized, will be grossly irresponsible

He said: “Another issue we want to address here today is the recent service-based electricity tariff adjustment by the Distribution Companies, or DISCOS. The truth of the matter is that due to the problems with the largely-privatized electricity industry, the government has been supporting the industry.

“Like Mr. President said today, at the opening of the Ministerial Retreat, this government is not insensitive to the current economic difficulties our people are going through and the very tough economic situation we face as a nation.

“We certainly will not inflict hardship on our people. But we are convinced that if we stay focused on our plans, brighter and more prosperous days will come soon.”

Mohammed faulted the opposition for playing politics and asked Nigerians not to allow them to throw the nation into chaos.

He said: “The opportunistic opposition and their allies are playing dirty politics with the issue of petrol pricing and electricity tariff. Please note that these naysayers did not complain when the price adjustment led to lower petrol prices on at least two occasions since March.

“Nigerians must therefore renounce those who have latched onto the issue of petrol pricing and electricity tariff review to throw the country into chaos.”

However, when asked whether the All Progressives Congress (APC) administration will now apologize to Nigerians for increasing the price of fuel after promising during its  electioneering campaigns in 2015 that it was  going to revert the price of fuel to N65 per litre, the Minister of Information and Culture, Lai Mohammed, declined to answer the question.

Mohammed said: “When you said you, I know you were referring to me (general laughter). But I refuse to take your question (more laughter).”

Role of govt

Buhari said: “The role of government now is to prevent marketers from raising prices arbitrarily or exploiting citizens. This was why the PPRA made the announcement a few days ago setting the range of price that must not be exceeded by marketers. The advantage we now have is that anyone can bring in petroleum products and compete with marketers, that way the price of petrol will keep coming down”.

He said that government had taken due notice of the prevalent complaints of arbitrary estimated billings by DISCOs and has directed that a mass metering programme be initiated to correct the menace of estimated billing.

“The other painful adjustment that we have had to make in recent days is a review of the electricity tariff regime. If there is one thing that we have heard over and over again, it is that Nigerians want consistent and reliable power supply. So the power sector remains a critical priority for the administration.

“Protecting the poor and vulnerable, while ensuring improved service in the power sector, is also a major priority for Government. And our policies, like the social investment programmes and other socio-economic schemes to benefit Nigerians, show that we remain focused on improving the welfare of the common man.

“Government has also taken notice of the complaints about arbitrary estimated billing. Accordingly, a mass metering programme is being undertaken to provide meters for over five million Nigerians, largely driven by preferred procurement from local manufacturers – creating thousands of jobs in the process. NERC has also been instructed to strictly enforce the capping regulation which will ensure that unmetered customers are not charged beyond the metered customers in their neighbourhood”, he said.

Speaking further, the President said beyond the efforts being made to improve reliable and stable power supply through the conventional national grid source, the federal government, through the recently initiated Economic Sustainability Plan (ESP), is working on electrifying five million homes, which are not connected to the national grid, through the solar home systems.

According to him, this innovation has more than just giving light to the homes of more than 25 million Nigerians, but would also provide job opportunities to around 300,000 persons.

“In addressing the power problems we must not forget that most Nigerians are not even connected to electricity at all. So, as part of the Economic Sustainability Plan, we are providing Solar home systems to five million Nigerian households (impacting up to 25 million individual Nigerians) in the next 12 months.

Solar home system

“We have already begun the process of providing financing support through the CBN for manufacturers and retailers of Off-Grid Solar Home Systems and Mini-Grids who are to provide the systems. The Five million systems under the ESP’s Solar Power Strategy will produce 250,000 jobs and impact up to 25 million beneficiaries through the installation. This means that more Nigerians will have access to electricity via a reliable and sustainable solar system.

“The support to Solar Home System manufacturers and the bulk procurement of local meters will create over 300,000 local jobs while ensuring that we set Nigeria on a path to full electrification. The tariff review is not about the increase, which will only affect the top electricity consumers, but establishing a system which will definitely lead to improved service for all at a fair and reasonable price”, he said.

Timing of rate hikes

On the concerns about the timing and reason behind introducing both price adjustments at about same period, he explained “it is important to stress that it is a mere coincidence in the sense that the deregulation of PMS prices happened quite some time ago, it was announced on 18 March 2020 and the price moderation that took place at the beginning of this month was just part of the on-going monthly adjustments to global crude oil prices. Similarly, the review of service-based electricity tariffs was scheduled to start at the beginning of July but was put on hold to enable further studies and proper arrangements to be made”, he explained.

The President added: “This government is not insensitive to the condition of our people and the very difficult economic situation and we will not inflict hardship on our people. Ministers and senior officials must accordingly ensure the vigorous and prompt implementation of the ESP programmes to give succour to Nigerians at this difficult time.

“In this regard, the Central Bank of Nigeria (CBN) has created credit facilities (of up to N100B) for the Healthcare (N100 Billion) and Manufacturing (N1 Trillion) sectors. From January 2020 to date, over N191.87B has already been disbursed for 76 real sectors projects under the N1Trillion Real Sector Scheme; while 34 Healthcare projects have been funded to the tune of N37.159B under the Healthcare Sector Intervention Facility.

Addressing the participants at the retreat, the President said “to address our current economic challenges, and consolidate on our achievements over the past year, this retreat has been designed to: Review the performance of each Minister in delivering the priority mandates, including programmes and projects assigned to them upon their appointment in 2019; Identify key impediments to implementation; and Re-strategize on how to accelerate delivery of results, given the current economic situation; evaluate the activities of the Ministries over the last twelve months with regard to the delivery of our agenda and promise to Nigerians.”

“The Ministers are urged to work closely with the Permanent Secretaries to ensure accelerated and effective delivery of the policies, programmes and projects in the priority areas. I have also directed the Secretary to the Government of the Federation to intensify efforts at deepening the work of the Delivery Unit under his coordination”, he said.

Mustapha, who acknowledged that the government had been unable to effectively track and monitor FEC approved policies, projects and programmes as earlier envisaged, due to the lock-down, arising from the COVID-19 pandemic, assured all that the process would be accelerated by Delivery Unit in the coming months.

He said as of September 2, 2020, the number of Memoranda, Briefs and Notes processed by the Cabinet Affairs Office stood at 282, while Federal Executive Council (FEC) had considered/approved 191 Memorandum, Briefs/Notes.



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