President Muhammadu Buhari has explained the reasons for the recent increase in the petrol pump price, also known as the price of premium motor spirit (PMS), saying that the COVID-19 pandemic has led to a severe downturn and impacted negatively on the country’s finances.
President Buhari, who hinted that the pandemic has severely hampered nation’s capacity to continue to subsidise the product, also justified a recent adjustment in the electricity tariff adjustment by the Discos, saying that the nation currently doesn’t have the resources to continue to support the industry in while it will be grossly irresponsible to borrow to subsidize a generation and distribution electricity which are both privatised.
Speaking at the First Year Ministerial Performance Review Retreat, held at the State House Conference Centre, Abuja, President Buhari said that to cushion the effect of the pandemic on the nation’s finances, 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).
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He added that that the benefit of lower prices at the time was passed on to consumers, explaining that the effect of deregulation though is that PMS prices will change with changes in global oil prices.
The president said there is no provision for fuel subsidy in the revised 2020 budget, simply because the nation couldn’t afford it, if reasonable provisions must be made for health, education and other social services, adding that with the current development Nigeria simply has no choice.
According to him, the current increment in the fuel price was due to deregulation, saying if the government fails to do so, the nation will return to subsidy regime while long queues of vehicles will resurface across the country.
“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,” President Buhari said.
Harping on the electricity tariff adjustment, President Buhari said that under the new arrangement, only customers who are guaranteed a minimum of 12 hours of power and above can have their tariffs adjusted. He said those who get less than 12 hours supply, or the Band D and E Customers must be maintained on lifeline tariffs, meaning that they will experience no increase.
Explaining the reasons for the development, President Buhari said that due to the problems with the privatization exercise, government has had to keep supporting the largely privatized electricity industry. He said that to keep the industry going, the government has so far spent almost 1.7 trillion, especially by way of supplementing tariff shortfalls.
This, he said, can no longer continue due to the paucity of fund, saying “We do not have the resources at this point to continue in this way and it will be grossly irresponsible to borrow to subsidize 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, who also expressed his displeasure about the quality of service given by the Discos, noted that there are many constraints, including poor transmission capacity and distribution capacity.
President Buhari said that NERC, the industry regulator, approved that tariff adjustments had to be made only on the basis of guaranteed improvement in service.
