President Muhammadu Buhari on Monday, September 7, 2020, cleared the air on the increase in petrol and electricity tariff, says the timing of implementation of the tariffs was a coincidence.
Speaking at the First Year Ministerial Performance Review Retreat at the State House Conference Centre, the President said implementation of a Willing buyer, Willing Seller Policy for the power sector has opened opportunities for increased delivery of electricity.
He noted that the target of providing 11,000 megawatts by 2023 was realistic and realizable, and would provide a lifeline for many businesses and improve the living conditions of many Nigerians.
He explained that the increase in the price of electricity and deregulation of the petroleum sector were crucial decisions that were taken at the beginning of the year, preceding the COVID-19 pandemic.
The President said the COVID-19 pandemic led to a severe downturn in the funds available to finance the nation’s budget. Thus, one of the steps his administration 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 (PMS) such that the benefit of lower prices at that time was passed to consumers.
“This was welcome by all and sundry. 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 we would see some increases in PMS prices. This is what has happened now. When global prices rose, it meant that the price of petrol locally would go up.
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“There are several negative consequences if the Government should even attempt to go back to the business of fixing or subsidizing PMS prices. First of all, it would mean a return to the costly subsidy regime. Today we have 60% 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. We now simply have no choice…” President Buhari said.
On electricity, the President added that the recent service-based tariff adjustment by the Discos had also been a source of concern for his administration.
He noted that because of the problems with the privatization exercise, the government had to keep supporting the largely privatized electricity industry.
The President explained that to keep the industry going, his administration had so far spent almost 1.7 trillion, especially by way of supplementing tariffs shortfalls.
He added that there are limited resources at this point to continue with this arrangement and it will be grossly irresponsible to borrow to subsidize a generation and distribution which are both privatized.
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The speech was read on behalf of the President by Vice President Yemi Osinbajo, as President Buhari was away in Republic of Niger at the 57th Ordinary Session of the ECOWAS Authority of Heads of State and Government.