Lai Mohammed to organized labour: Strike will bring more hardship to ordinary Nigerians + Full text

By GBENGA ADEOLA

…Government not insensitive to plight plight of Nigerians

TEXT OF THE BRIEFING BY THE HON. MINISTER OF INFORMATION AND CULTURE,

ALHAJI LAI MOHAMMED, IN LAGOS ON

SATURDAY, 26 SEPT 2020 ON THE RECENT INCREASES IN PETROL AND

ELECTRICITY PRICES.

 

Good morning gentlemen, and thank you most sincerely for honouring our

invitation to this briefing.

 

2. 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 have 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

government.

 

3. 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

 

4. Let’s start with deregulation. Ordinary citizens are not the

beneficiaries of the subsidy on petroleum products that has 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 scarcity of petroleum

products. They endured incessant long queues and paid higher to get

the products, thus making the subsidy ineffectual.

 

5. Apart from that, the truth is that the government can no longer

afford the cost of 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.

 

6. Still on subsidy, as I said, from 2006 to 2019, fuel subsidy

gulped 10.4 trillion Naira. That is an average of 743.8 billion Naira

per annum. 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

 

7. 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.

 

8. 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.

 

9. 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 Waltersmith 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,

 

10. 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

 

11. 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.

 

ELECTRICITY TARIFF

 

12. Another issue we want to address here today is the recent

service-based electricity tariff adjustment by the Distribution

Companies, or DISCOS. 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 1.7 trillion Naira, especially by way of

supplementing tariff 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.

 

13. But in order to protect the large majority of Nigerians who cannot

afford to pay cost-reflective tariffs from increases, the industry

regulator, Nigerian Electricity Regulatory Commission (NERC), has

approved that tariff adjustments had to be made but only on the basis

of guaranteed improvement in service. Under this new arrangement, only

customers with guaranteed minimum of 12 hours of electricity can have

their tariffs adjusted. Those who get less than 12 hours supply will

experience no increase. This is the largest group of customers.

 

14. Government has also noted 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, and creating

thousands of jobs in the process. NERC will also strictly enforce the

capping regulation to ensure that unmetered customers are not charged

beyond the metered customers in their neighbourhood. In other words,

there will be no more estimated billings.

 

15. The government is also taking steps to connect those Nigerians who

are not even connected to electricity at all. As you are aware, under

its Economic Sustainability Plan, the government is providing solar

power to 5 million Nigerian households in the next 12 months. This

alone will produce 250,000 jobs and impact up to 25 million

beneficiaries through the installation, thus ensuring that more

Nigerians will have access to electricity via a reliable and

sustainable solar system.

 

16. Again, like PMS, despite the recent service-based tariff review,

the cost of electricity in Nigeria is still cheaper or compares

favourably with that of many countries in Africa.

 

HERE ARE COST IN NAIRA PER KWH IN SOME AFRICAN COUNTRIES.

– Nigeria 49.75

– Senegal 71.17

– Guinea 41.36

– Sierra Leone 106.02

– Liberia 206.01

– Niger 59.28

– Mali 88.23

– Burkina Faso 85.09

– Togo 79.88

 

TIMING OF THE PRICE INCREASES

 

17. Gentlemen, the timing of these two necessary adjustments, in the

petroleum and power sectors, has raised some concerns among Nigerians

and reinforced the false narrative that the government is insensitive

to the plight of the citizens. This is a mere coincidence. First, the

deregulation of PMS prices was announced on 18 March 2020, and the

price modulation that took place at the beginning of this month was

just part of the on-going monthly adjustments to global crude oil

prices.

 

18. Also, the review of service-based electricity tariffs was

scheduled to start at the beginning of July 2020 but was put on hold

so that further studies and proper arrangements can be made. Like Mr.

President said at the opening of the last Ministerial Retreat, this

government is not insensitive to the current economic difficulties our

people are going through and the very tough economic situation we face

as a nation. We certainly will not inflict hardship on our people. But

we are convinced that if we stay focused on our plans, brighter and

more prosperous days will come soon.

 

19. We thank Nigerians for their understanding, and wish to appeal to

them to please bear with the government. The deregulation of the

petroleum sector will save the country trillions of Naira, which can

then be used to provide modern infrastructures for the benefit of the

people. It will also spur investments in the petroleum industry,

especially in the building of local refineries which will result in

lower fuel prices.

 

20. Also, the service-based electricity tariff adjustment and the

ongoing work by German company Siemens to boost power supply in

Nigeria will help end the perennial power problem in the country. Let

me remind you that under the three-phase Siemens deal, Nigerians will

enjoy 7,000 megawatts of reliable power supply by the end of 2021

(phase 1), 11,000 megawatts by the end of 2023 (phase 2) and 25,000

megawatts in the third phase.

 

21. Finally, we wish to appeal to organize labour to shelve its

planned strike, which can only bring more hardship to ordinary

Nigerians.