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Energy

Deregulation: In whose interest?

Subsidy removal would free up the much-needed funds to be channeled into critical sectors of the economy.

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Amid the many shocks Nigerians have had to deal with in 2020, the recent increase in fuel price by the Federal Government is perhaps the bitterest pill to swallow.

Pipelines and Product Marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation, (NNPC), issued a memo on Wednesday stating that effective immediately, the price of fuel would increase from N148 to N151.56k.

This is coming at a time the new electricity tariff regime is kicking off, having been postponed twice from April 1, 2020, to take full effect on September 1, 2020. This, according to the government, is in the best interest of all.

READ: Kachikwu advocates refineries repair as petrol landing cost reaches N180 per litre

But how is an increase, any kind of increase, in the interest of Nigerians?

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Recall that over the last couple of months, the government had increased the pump price from N121.50 to N138.60, N143.80 and N145 per litre at different times, on the advice of the Petroleum Product Pricing Regulatory Agency (PPPRA), after reviewing market fundamentals and operating costs.

Fuel price had started the year at N145 per litre, and only crashed down to N125 in March due to the global crisis which led to a fall in demand, and subsequently a fall in price.

It was at this point that the government effectively removed fuel subsidy since the landing costs had dropped below the pump price, and there was no longer need to subsidise the price for Nigerians.

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Before the crash

Prior to the global crash, the government paid the difference between the Expected Open Market Price (“EOMP”) and the approved retail price of petrol (known as fuel subsidy), in order to make the produce available to the populace at an affordable price, irrespective of the prevailing market forces.

For instance, where a pump price of N145 had been agreed on, and the landing cost of fuel is put at N143, the marketers cannot be able to sell at N145 per litre since they still have to factor in other costs of operations, and transporting the fuel to their stations.

With the government bearing a part of the costs in the subsidy plan, the marketers can sell at the general agreed price, without running at a loss, while the consumers get to buy the product less than the actual costs.

READ: CBN: Unconventional monetary policies needed to grow and diversify the economy 

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With this system, a removal of subsidy would almost certainly result in an increase in fuel price except in situations like we saw in March where the landing price had already dropped below the pump price. We can see an example of this in the spike in fuel price which took place immediately former President Goodluck Jonathan removed fuel subsidy in January 2012.

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Overnight, fuel price had gone from N65 to N141. After several protest marches across the country, the price was later brought down to N97 in a partial subsidy arrangement where the government could spend less on subsidy and free up funds to channel into other sectors of the economy.

This however, was not the case this year, as the government delayed the removal of subsidy until a time when the landing costs of fuel had fallen below the pump price. The result of this was that Nigerians enjoyed a reduction in fuel price immediately, with the price only increasing when the global oil market picked up and landing costs of fuel went up again.

READ: FG abolishes fuel subsidy regime as full deregulation sets in

Given the current trends in the global market, a reduced pump price will only be possible if we return to the years of subsidy regime, with the attached controversies, smuggling, fuel scarcity and the resulting long queues at petrol stations.

Thankfully, we are far from the era of queuing long hours to buy fuel. The President recently directed a nationwide mass metering programme for electricity consumers in the country and approved a one-year waiver of import levy on electricity meters to speed up the process and reduce the cost of the metering for Nigerians.

The government is working with the Electricity Distribution Companies to ensure increased electricity supply and improved quality of service. This will protect Nigerians from arbitrary and estimated billings, while improving living standards and reducing costs of business operations for entrepreneurs.

Given that the government spent an estimate of N10 trillion spent on Fuel subsidy between 2006 and 2018, one can see that subsidy removal would indeed free up the much-needed funds to be channeled into critical sectors of the economy.

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For instance, the COVID-19 pandemic has exposed serious gaps in the health sector, and there is no doubt that some additional funds would do wonders for the sector.

With the subsidy removed earlier this year, fuel price is now subject to the market forces of demand and supply which will allow all market players to operate on fair grounds. Eventually, competitive pricing will follow this realistic pricing system, and Nigerians will be better for it.

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Article written by John Adebayo, a public commentator.

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform. To get your articles on Nairametrics, kindly send an email to [email protected] and we will publish it within 24 hours of approval by our editorial team.

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Energy

Nigeria now generates 13,000mw of power – Minister of Power

Nigeria’s installed grid power generation capacity has increased from 8,000mw to 13,000mw under President Muhammadu Buhari.

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FG set to create at least 5 million jobs for youths in the power sector – Minister of Power , Consortium of Western investors to inject upwards of $5 billion in Nigeria's renewable energy sector, Power: Nigeria's deal with Siemens - the birth of a new era?

Minister of Power, Engineer Sale Mamman, disclosed that Nigeria’s installed grid power generation capacity has increased from 8,000mw to 13,000mw under the leadership of President Muhammadu Buhari.

This was stated by the Minister during the 2021 budget defence, before the House of Representatives Committee on Power in Abuja, as reported on the Twitter handle of  the Office of the Minister of Power today.

READ: N2trillion Mambila project: FG starts disbursement of compensation funds

READ: DisCos seek CBN funding for massive roll-out of meters to consumers

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READ: FG targets $150 billion revenue from Zero-oil plan 

However, members of the committee raised concerns about power supply to their various constituencies, urging the minister to ensure adequate supply.

The Minister explained that the distribution system had the capacity to evacuate 5,500mw of power, which is a significant improvement from 4,500mw in 2015, and that better performance should be expected in the near term.

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READ: FG to spend N447.6 billion on Police in 2021

READ: FG set to provide interest-free loans and agricultural inputs to farmers

Engr. Aliyu Magaji (APC-Jigawa), the Chairman of the committee, asked the Minister to mete out stiffer sanctions to the Distribution Companies (DisCos), to make them to sit up and provide the desired services to Nigerian people.

Magaji said that if the minister ensured the sanction of the DisCos, he would become the darling of lawmakers and the entire Nigerians.

READ: FG to inject over N198 billion on capital projects in power sector in 2021

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What they are saying

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On the performance of the Ministry since 2015, Engineer Mamman said:

During the period between 2015 to date, the sector has recorded successes and has faced challenges. In order to deliver this administration’s promise of providing stable and affordable power to Nigerians, a way forward was defined and supported by Mr. President’s political will.

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Energy

FG to invest in the deployment of Mini-grid systems to power 5 million homes in 2021

The Minister said the government will invest in Mini-grid systems that will provide power for 5 million homes in 2021.

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Estates in Lekki increase electricity tariff to N105/kWh, Eko Electric, Ikeja and 5 others to face NERC sanction for non-compliance, CBN reveals framework for financing National Mass Metering Programme (NMMP)

In a bid to provide remote communities with clean and affordable energy, the Minister of Power, Engineer Sale Mamman has disclosed that the Government is set to invest heavily in the deployment of Mini-grid systems that will provide power for 5 million homes in 2021.

This disclosure was made by Engr. Sale Mamman in a statement released into the mainstream media via his official Twitter handle.

READ: Electricity: Nigeria now has an installed generation capacity of 13,000MW – Minister of Power

The Minister explained that it is virtually impossible for the National grid to cover every geographical point within Nigeria. He emphasized that this reality prompted the present administration to sort out alternatives, and as a result, the Government is set to invest heavily in the deployment of Mini-grid systems, which can easily get to the most remote communities and provide clean, and affordable energy in 2021.

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READ: Nigeria to fix irregular power supply in 40 years- Senate

What they are saying

The Minister, in his statement, said, “It is virtually impossible to have the National grid covering every geographical point within Nigeria, that is why the Government is investing heavily in the deployment of Mini-grid systems, which can easily get to the most remote communities and provide clean, affordable energy.

“In 2021, part of our priorities at the Ministry and two of its implementing agencies will be on providing these Mini-grid systems for communities and stand-alone home solar systems. We have a target of 5 million homes. Clean, affordable, and accessible energy for all.”

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(READ MORE:FG set to create at least 5 million jobs for youths in the power sector – Minister of Power)

What you should know

The Minister of Power, Engineer Sale Mamman, at the 2021 budget defense before the House of Representatives Committee on Power in Abuja, yesterday disclosed that Nigeria’s installed grid power generation capacity has grown from 8,000MW to 13,000MW under the leadership of President Muhammadu Buhari.

READ: UPDATED: FG appoints Eweluka as NBET MD, as finance, power ministers wrestle

The Minister also pointed out that the distribution system had the capacity to evacuate 5,500MW of power, which is a significant improvement from 4,500MW in 2015.

 

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Energy

Electricity: Nigeria now has an installed generation capacity of 13,000MW – Minister of Power

Engineer Sale Mamman has disclosed that Nigeria’s installed grid power generation capacity has grown from 8,000mw to 13,000mw.

Published

on

FG set to create at least 5 million jobs for youths in the power sector – Minister of Power , Consortium of Western investors to inject upwards of $5 billion in Nigeria's renewable energy sector, Power: Nigeria's deal with Siemens - the birth of a new era?

The Minister of Power, Engineer Sale Mamman, has disclosed that Nigeria’s installed grid power generation capacity has grown from 8,000mw to 13,000mw under the leadership of President Muhammadu Buhari.

A statement was issued by the Office of the Minister of Power via its official Twitter handle.

READ: The number of idle power plants in Nigeria rises to 10 

READ: Here is why Gencos may halt power sector investment plans 

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Yesterday, during the 2021 budget defense before the House of Representatives Committee on Power in Abuja, Engr. Sale Mamman said that under the leadership of President Muhammadu Buhari, the capacity of the installed power generation grid has grown from 8,000mw to 13,000mw.

READ: Buhari to commission Lagos-Ibadan railway January 2021, starts operation November 2020

However, members of the committee raised concerns about the power supply to their various constituencies, urging the minister to ensure adequate supply. The Minister explained that the distribution system had the capacity to evacuate 5,500mw of power, which is a significant improvement from 4,500mw in 2015, and better performance should be expected in the near term.

GTBank 728 x 90

READ: Buhari flags off $2.8 billion gas pipeline project, biggest in Nigeria’s history

Engr. Aliyu Magaji (APC-Jigawa), the Chairman of the Committee, asked the Minister to mete out stiffer sanctions to the distribution companies (DISCOs), to enable them to sit up and provide the desired services to the Nigerian people.

Magaji said that if the minister ensured the sanction of the DisCos, he would become the darling of lawmakers and the entire Nigerians.

READ: Buhari earmarks N420 billion for N-Power, GEEP and others under NSIP in 2021 budget

READ: GenCos want Discos’ job as it seeks to sell electricity directly to customers 

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What they are saying

Speaking on the performance of the Ministry since 2015, Engineer Sale Mamman said, “Under the able leadership of President Muhammadu Buhari, the country’s grid power capacity has increased significantly from the time this administration took over in 2015 to date.

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READ: FG set to create at least 5 million jobs for youths in the power sector – Minister of Power

He explained further that, “during the period between 2015 to date, the sector recorded successes and has faced challenges. In order to deliver this administration’s promise of providing stable and affordable power to Nigerians, a way forward was defined and supported by Mr. President’s political will.”

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