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Government Unable To Fund Subsidy Anymore - Lai Mohammed

Government Unable To Fund Subsidy
Petrol and Electric Tariff Incrementation

Full text of the Honourable Minister of Information and Culture - Alhaji Lai Mohammed on the state of the nation with regards to petrol and electric tariff increment.

The Honourable Minister of Information and Culture in a brief press address today 26 September 2020 with online publishers in Lagos State has confirmed that government can no longer accommodate subsidy payment for its citizens due to economic instability and global meltdown. Full details below.

"Good morning gentlemen, and thank you most sincerely for honouring our invitation to this briefing.September 26, 2020

"As you are aware, the hike in the cost of fuel as a consequence of deregulation and the higher prices occasioned by service-based electricity tariff adjustment has led to various reactions, especially from organized labour which has threatened a nationwide strike.

"It has also led to accusation of insensitivity on the part of the government.

"I want to assure Nigerians, through you - gentlemen of the press - that the government is not insensitive to their plight.
As a matter of fact, the full deregulation of the petroleum sector and the service-based electricity tariff adjustment will, in the long run, benefit the ordinary people

"Let's start with deregulation. Ordinary citizens are not the beneficiaries of the subsidy on petroleum products that have lasted for years.

"Between 2006 and 2019, a total of 10.4 trillion Naira was spent on fuel subsidy, most of which went to fat cats who either collected subsidy for products they didn't import or diverted the products to
neighbouring countries, where prices are much higher.

"Instead of subsidy, ordinary Nigerians were subjected to the scarcity of petroleum products. They endured incessant long queues and paid higher to get the products, thus making the subsidy ineffectual

"Apart from that, the truth is that the government can no longer afford the cost of the subsidy, especially under the prevailing economic conditions.

"Revenues and foreign exchange earnings by the government have fallen by almost 60%, due to the downturn in the fortunes of the oil sector. And there is no provision for subsidy in the revised 2020 budget.

"So where will the subsidy money come from? Remember that despite the massive fall in revenues, the government still has to sustain expenditures, especially on salaries and capital projects.

"According to figures provided by the NNPC, the breakdown of the 14-year subsidy is as follows:
- In 2006 Subsidy was 257bn
- In 2007 Subsidy was 272bn
- In 2008 Subsidy was 631bn
- In 2009 469bn
- In 2010 667bn
- In 2011 2.105tn

In 2012 1.355tn
- In 2013 1.316tn
- In 2014 1.217tn
- In 2015 654bn
- In 2016 Figure Not Available
- In 2017 Subsidy was 144.3bn
- In 2018 730.86bn
- And in 2019 Subsidy was 595bn

"The drastic fall in the revenues of the government explains why the government had to take certain tough decisions, even as it is acting to mitigate the effect of the economic slowdown by adopting an Economic Sustainability Plan.

"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.

"Recall that 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. I am sure Nigerians will prefer to pay slightly higher for PMS than to queue for hours just to get the products at higher prices.

"I also want to say that the effect of the changes in the international prices of crude oil on local fuel prices will not last forever.

"Modular refineries are beginning to come on stream in the country, and this will help lower the cost of petroleum products.

"Next month, the Waltersmithng Modular Refinery in Ibigwe, Imo State, will be commissioned, starting with refining 5,000 barrels of crude per day and increasing rapidly to 50,000 barrels of crude.

"Many more modular refineries are also in different stages of completion across the country, in addition to the 650,000 barrels per day Dangote Refinery.

"The deregulation will bring more investments into the sector, to the benefit of Nigerians.

"Gentlemen, even with the increase in the price of fuel due to deregulation, PMS is still cheaper in Nigeria than in the neighbouring countries, and indeed in the entire West/Central African sub-regions.

"Here is a comparative analysis of petrol prices in the sub-regions (Naira equivalent per litre);
- Nigeria - 162 Naira per litre
- Ghana - 332 Naira per litre
- Benin - 359 Naira per litre

- Togo - 300 Naira per litre
- Niger - 346 Naira per litre
- Chad - 366 Naira per litre
- Cameroon - 449 Naira per litre
- Burkina Faso - 433 Naira per Litre
- Mali - 476 Naira per litre

- Liberia - 257 Naira per litre
- Sierra Leone - 281 Naira per litre
- Guinea - 363 Naira per litre
- Senegal - 549 Naira per litre

"Outside the sub-region, petrol sells for 211 Naira per litre in Egypt and 168 Naira 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. In the long run, deregulation will pay off and Nigerians will pay less.


"Another issue we want to address here today is the recent service-based electricity tariff adjustment by the Distribution Companies or DISCOS.

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