The angry reactions that have greeted the latest prices of Premium Motor Spirit (PMS) are unnecessary and totally mischievous, the federal government has said.
While it said the sums of N10.413 trillion and N1.7trillion were at different times ploughed into oil subsidy and tariff shortfalls respectively, the government said to continue such policy would be irresponsible.
The duo of President Muhammadu Buhari and Minister of Information and Culture Lai Mohammed spoke at separate fora Monday in Abuja.
Buhari
Speaking at a 2-day First Year Ministerial Performance Review Retreat at the State House Conference Centre Abuja, the president said there would be dire consequences if the government continues with the business of fixing or subsidising the prices of PMS.
Represented by Vice President Yemi Osinbajo, the president said the COVID-19 pandemic had led to a severe downturn in the funds available to finance the nations’ budget and also severely hampered government’s capacity.
However, President Buhari said government was working towards mitigating the impact of the deregulation on the citizens.
He said: “There are several negative consequences if the government should even attempt to go back to the business of fixing or subsidising PMS prices.
“First of all, it would mean a return to the costly subsidy regime; today we have 60 per cent less revenues; we just 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.
“Nigerians no longer have to endure long queues just to buy petrol, often at highly inflated prices; also, as I hinted earlier, there is no provision for fuel subsidy in the revised 2020 budget.
“Simply because we are not able to afford it, if reasonable provisions must be made for health, education and other social services.”
He said government was not unaware of the pains occasioned by the tough decisions, but said: “We will continue to seek ways and means of cushioning pains especially for the most vulnerable in our midst.
“We will also remain alert to our responsibilities to ensure that marketers do not exploit citizens by raising pump price arbitrarily.
“This is the role that the government must now play through the Petroleum Products Pricing Regulatory Agency (PPPRA).
“This explains why the PPPRA made the announcement a few days ago setting the range of prices 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 be keep coming down.”
On the recent increase in electricity tariffs by the Electricity Distribution Companies (Discos), he said like many Nigerians, he was also unhappy with the quality of service given by the Discos, which he blamed on several constraints, including poor transmission capacity and distribution capacity.
While saying he had already signed off on the first phase of the Siemens project to address the challenges, he said: “Because of the problems with the privatisation exercise, the government has had to keep supporting the largely privatised electricity industry.
“So far to keep the industry going we have spent almost N1.7 trillion, especially by way of supplementing tariffs shortfalls.
“We do not have the resources at this point to continue in this way and it will be grossly irresponsible to borrow to subsidise a generation and distribution which are both privatized.
“But we also have a duty to ensure that the large majority of those who cannot afford to pay cost reflective tariffs are protected from increases.”
The president further said the industry regulator – Nigerian Electricity Regulatory Commission (NERC) – approved that tariff adjustments had to be made but only on the basis of guaranteed improvement in service.
Under the new arrangement, the president said only customers guaranteed a minimum of 12 hours of power and above can have their tariffs adjusted.
Those with less than 12-hour supply – that is the Band D and E customers, Buhari said, must be maintained on lifeline tariffs, meaning that they will experience no increase.
“This is the largest group of customers; the 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 5 million Nigerians, largely driven by preferred procurement from local manufacturers – creating thousands of jobs in the process,” he said.
The president further said the N2.3 trillion Economic Sustainability Plan (ESP), consisting of fiscal, monetary and sectoral measures, would enhance local production, support businesses, retain and create jobs and provide succour to Nigerians, especially the most vulnerable.
Earlier in his opening address, Secretary to the Government of the Federation (SGF) Boss Mustapha said the retreat was designed to provide an opportunity for the government to review the first-year report of the ministerial mandates.
Lai
Providing further insights at a parley with journalists Monday in Abuja, the information and culture minister, Alhaji Mohammed said it’s mischievous to condemn the increased service charges in both the oil and power sectors.
He 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 145 to 125 Naira per litre, and then to between 121.50 and 123.50 Naira 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 162 Naira 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.”
“ Gentlemen, 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.
“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.
“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,” the minister said.
On what went into subsidising services in the two sectors, he said: “The cost of fuel subsidy is too high and unsustainable. From 2006 to 2019, fuel subsidy gulped 10.413 Trillion Naira. That is an average of N743.8 billion per annum.”
He reeled out figures on what it cost government to subsidise in the last 14 years.
Quoting NNPC , he said: In 2006 it was N257bn; 2007-N272bn; 2008-N631bn; 2009-N 469bn; 2010-N667bn; 2011-N 2.105tn; 2012-N1.355tn and N1.355tn in 2013.
The rest are: 2014-N1.217tn; 2015-N654bn; 2016-figure not available; 2017-N144.3bn;
2018-N730.86bn and in 2019 it was N595bn.
In spite of the increase, he said fuel price in West/Central Africa sub-regions remains one of the cheapest.
Making a comparative analysis in naira value, he said while Nigeria sells for 162 Naira per litre, Ghana sells for N332; Benin N359; Togo N300; Niger N346; Chad N366; Cameroon N449; Burkina Faso N433; Mali N N476; Liberia N257; Sierra Leone N281; Guinea N363 and Senegal at N549 per litre.
Outside the sub-region, he said petrol sells for N211 per litre in Egypt and N168 in Saudi Arabia.
“You can now see that even with the removal of subsidy, fuel price in Nigeria remains among the cheapest in Africa,” the minister said.
Electricity
On electricity charges as adjusted by DisCos, he said: “The truth of the matter is that due to the problems with the largely-privatized electricity industry, the government has been supporting the industry. To keep the industry going, the government has so far spent almost N1.7 trillion, especially by way of supplementing tariffs shortfalls.”
“The government does not have the resources to continue along this path. To borrow just to subsidize generation and distribution, which are both privatized, will be grossly irresponsible.
He similarly did a comparative analysis of what obtains in Nigeria a few Africa countries at cost in Naira at per kwh.
While Nigeria is 49.75; Senegal is 71.17; Guinea 41.36; Sierra Leone 106.02; Liberia 206.01; Niger 59.28; Mali 88.23; Burkina Faso 85.09 and Togo is 79.88 per kwh
While further countering the criticism that greeted the new price regimes, the minister 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.
