He said the President Muhammadu Buhari administration has not let down Nigerians with the new price, adding that it had no choice than to deregulate the petroleum sector.
The facts, according to Mohammed, are that:
in 2015, the Federal Government paid N1trillion as subsidy, which amounted to one-sixth of this year’s budget;
it cannot afford such a huge amount of subsidy again;
the liberalisation policy will lead to the creation of 600,000 jobs; and
labour leaders were not deceived or tricked on the new pump price.
Mohammed, at a news conference in Abuja, gave reasons for the new deregulation policy. They are to end the crippling fuel scarcity, tackle the drastic fall in the price of crude oil and no funding or appropriation for N16.4 billion monthly subsidy.
There are the renewed insurgency and pipeline vandalism which have reduced oil production from 2.2m bpd to 1.65m bpd.
Besides, foreign reserves have fallen.
The Minister said: “Many have also tried to compare what happened in 2012, when the last administration increased fuel price, with the new price regime of 2016. Our answer to that is that there is no basis for comparison.
”The truth is that the NNPC does not have the resources for, nor is it designed to meet, this increase in supply. The result is the crippling fuel situation across the country. Pushed to supply 90% of the products required for domestic consumption, the NNPC has continued to utilise crude oil volumes outside the 445,000 barrels/day allocated to it, thereby creating major funding and remittance gaps into the Federation account.
“Also, the renewed insurgency and pipeline vandalism in the Niger Delta have drastically reduced national crude oil production to 1.65 million barrels per day, against 2.2 million barrels per day planned in the 2016 budget, further reducing income to Federation account and also affecting crude volumes for PMS conversion and impacting Federal Government’s forex earnings.
“Let me also note that the resultant fuel scarcity has created an abnormal increase in price, resulting in Nigerians paying between N150 and N300 per litre as prevalent hoarding, smuggling and diversion of products have reduced volumes made available to citizens.”
Mohammed debunked the insinuations that the Buhari administration has let down Nigerians who voted for change in last year’s presidential election.
He also insisted that the conditions which made Nigerians to oppose deregulation in 2012 were not the same as today’s situation.
He added: “On the question that have we not let down Nigeria? The answer is no. We have not let down Nigerians. I think, we have just been courageous enough to let Nigerians know that we have to take this measure.
“Governance is not about popularity. There are times in life you have to take a very hard decision and this decision we are taking is for the long term and for the benefit of everybody.
“The conditions in 2012 were vastly different from the conditions now. Then, oil was selling for over $100 a barrel, compared to just a little over $40 a barrel now. Then, the country was awash in forex, thanks to the high earnings from oil. Then the foreign reserve was high. The situation today is dire: Earnings from oil have fallen drastically. Foreign reserves have fallen. The new price regime is simply inevitable.
“With the drastic fall in the price of crude oil, which is the nation’s main foreign exchange earner, there has also been a drastic reduction in the amount of foreign exchange available.
“The unavailability of forex and the inability to open letters of credit have forced marketers to stop product importation and imposed over 90% supply on the NNPC since October 2015, in contrast to the past where NNPC supplies 48% of the national requirement.”
Reacting to a question, the Minister said the Federal Government did not deceive or trick labour leaders on the new fuel price.
He said: “I think number one, we did not deceive anybody. There was nowhere in our manifesto that we ever told anybody that we were going to continue with the regime of subsidy.
There was no truth that we deceived anybody. Because I was there at that meeting on Wednesday and in all of the meetings, everybody, especially the labour leaders, were asked to comment.
“Nobody faulted the template. The only thing they told us was that ‘we have heard and we are going to go back to report to our organisations’. So the issue of deception does not come in at all.”
The minister insisted that the new price regime does not amount to removal of subsidy.
He said: “No. There is no subsidy to remove because no provision was made for subsidy in the 2016 budget. Last year, the government paid out N1trillion in subsidy, and that’s one-sixth of this year’s budget. We can’t afford to pay another N1trillion in subsidy
“As I said earlier, there is no provision for subsidy in the 2016 Appropriation. The erstwhile PMS price of N86.50 gives an estimate subsidy claim of N13.7 per litre, which translates to N16.4 billion monthly. There is neither funding nor appropriation to cover this.
“In the absence of available forex lines or crude volumes to continue massive importation of PMS, it is clear that unless immediate action is taken to liberalise the petroleum supply and distribution, the queues will persist, diversion will worsen and the current prices will spiral out of control.
“Under the new price regime, the PPPRA and DPR will be further empowered to ensure a level playing ground and strict compliance with market rules by all stakeholders and consumer protection.
“The liberalisation of petrol supply and distribution will allow marketers and any Nigerian entity willing to supply PMS to source for their forex and import PMS to ensure availability of products in all locations of the country.”
Mohammed claimed that the deregulation will fetch 600,000 new jobs nationwide.
He said the new pricing regime would:
solve the recurrent fuel scarcity by ensuring product availability across the country;
reduce hoarding, smuggling and diversion of products substantially and stabilises price;
ensures market stability and improve fuel supply situation through private sector participation;
create labour market stability, as this will potentially create additional 200,000 jobs through new investments in refineries and retails and prevent potential loss of 400,000 jobs in existing investments
Said Mohammed: “We are therefore seeking the understanding of all Nigerians, and appealing to the organised labour to sheathe their sword. This is not the time for any action that will further worsen the economy. The situation is dire, not just in Nigeria but elsewhere around the world.
“For instance, the United Arab Emirates, the third-biggest oil producer in OPEC, has become the first country in the oil-rich Persian Gulf to remove transport fuel subsidies. In addition, the country has announced that with effect from 1 Aug. 2016, fuel prices will be deregulated. Also, in response to fiscal pressure caused by the fall in crude oil prices, OPEC’s top oil producer Saudi Arabia has announced a plan to raise fuel prices. You can now see that this is indeed a global problem.”
Mohammed said since the 2016 Budget was already designed with in-built palliatives, there will be no new ones because of the new pump price regime.
He said: “Many people have asked if the government is planning any palliatives in the wake of the new price regime. Our answer is that the entire 2016 budget is packed with palliatives. Some N500,000 billion has been set aside for social intervention that will touch the lives of millions of Nigerians and lift millions more out of poverty. He listed some of these intervention programmes:
500,000 graduates are to be employed and trained as teachers;
370,000 non-graduates (artisans, technicians) to be trained and employed;
1 million people (farmers, market women, etc) to be granted loans to set up small businesses;
Conditional Cash Transfer to be made to the most vulnerable people (not unemployed graduates);
• School Feeding targeting 4.5 million pupils; and
Bursaries/Scholarships for STEM (Science, Technology, Engineering and Mathematics) students.