The Federal Government has disclosed that the recent hike in pump price of premium motor spirit, better known as petrol, and increase in electricity tariffs were borne out of necessity and that plans are underway to regulate marketers and industry players of both sectors to ensure citizens were not ripped off through arbitrary prices.
As stated, the increase had become imperative after the outbreak of coronavirus which affected the country’s economic fortune and necessitated the review of the 2020 budget to reflect the country’s current reality.
The Vice President, Yemi Osinbajo, said that the increase, particularly that of petroleum was a result of the apex government deregulation initiative which ended the subsidy regime and that the fluctuating pump price was subjected to global prices of oil.
Addressing participants during the First Year Ministerial Performance Review Retreat on Monday in Abuja, Osinbajo admitted that the country could not continue with subsidizing petroleum for the citizens and the financial burden was taken a toll on the country’s earning and taxpayers money.
According to him, the citizens would have to endure the inconveniences as part of measures to augment the government’s effort in repositioning the country’s for greater efficiency by eliminating all loopholes of systemic corruption.
The Vice President revealed that President Muhammadu Buhari-led administration was not considering returning to the subsidy regime, saying the country could not afford to subsidize petroleum for Nigerians and that petroleum subsidy was not budgeted for in the review 2020 budget.
“The COVID-19 has led to a severe downturn in the funds available to finance our budget and has severely hampered our capacity. One of the steps we took at the beginning of the crisis in March when oil prices collapsed at the height of the global lockdown was the deregulation of the price of premium motor spirit such that the benefit of the lower prices at the time was passed on to consumers.
“The effect of the deregulation is that pump prices of petrol will change with the changes in global oil prices. This means quite regrettably that as oil prices go higher, we could see some increases in pump price. This is what has happened now when global prices rose, it meant that the prices of petrol locally will also go up. There are several negative consequences if the government should go back to the business of fixing or subsidizing petroleum or PMS prices.
“First of all, it will mean a return to the costly subsidy regime. Today, as we’ve heard, we have 60 percent less revenue. We simply cannot afford the cost. The second danger is the potential return of fuel queues which has thankfully become a thing of the past. Nigerians no longer have to endure long queues just to buy petrol often at highly inflated prices. Also, there is no provision for fuel subsidy in the revised 2020 budget simply because we are not able to afford such a cost. If reasonable provision must be made for health, education, and other social services, we simply cannot sustain petroleum subsidies.
“The recent service-based tariff adjustment by the discos has also been a source of concern to many of us. Let me say frankly like many Nigerians, I have been very unhappy with the service by many of the discos. But there are many constraints including poor transmission and distribution capacities. I’ve already signed off the first phase of the Siemens Project to address many of these issues.
“Because of the problems of the privatization exercise, the government has had to keep supporting the largely privatised electricity industry. So far, to keep the industry going, we have spent close to N1.7trn especially by way of supplementing tariff shortfalls. We simply do not have the resources at this time to continue in this way. And it will be grossly irresponsible to borrow to subsidize generation and distribution which are both privatised,” he said.
The government reaction followed lamentations and condemnations from Nigerians over increases in the price of fuel and electricity tariffs in the country.