Lai Mohammed details how FG spent N10.4trn on fuel subsidy in 13 years, N1.7trn to cushion electricity tariff shortfalls

The Minister of Information and Culture, Lai Mohammed, on Monday, September 7, explained how the Federal Government spent N10.413 trillion on fuel subsidy in the last 13 years (2006-2019).

Lai Mohammed made this disclosure at a media briefing in Abuja, in efforts to justify why the government announced an end to the payment of subsidy on fuel last week.

The minister explained that the decision became necessary due to the falling demand for oil, which remains Nigeria’s main income source.

He also called on Nigerians to understand and support the decision.

“The cost of fuel subsidy is too high and unsustainable. From 2006 to 2019, fuel subsidy gulped N10.413trillion. That is an average of N743.8 billion per annum.

“Government can no longer afford to subsidize petrol prices, because of its many negative consequences. These include a return to the costly subsidy regime. With 60 percent less revenues today, we 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.

“The days in which Nigerians queue for hours and days just to buy petrol; often at very high prices, are gone for good.

“Of course, there is also no provision for fuel subsidy in the revised 2020 budget; because we just cannot afford it,” he said.

Speaking on the hike in electricity tariffs, Lai Mohammed explained that the government had spent about N1.7 trillion to supplement tariffs shortfalls.

The minister, however, did not indicate the period within which the government spent the amount.

“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 N1.7 trillion; especially by way of supplementing tariffs shortfalls.

“The government does not have the resources to continue along this path. To borrow just to subsidize generation and distribution; which are both privatised, will be grossly irresponsible,” Lai Mohammed said.

He said the government in order to protect the large majority of Nigerians who cannot afford to pay cost-reflective tariffs from increases; “the industry regulator, NERC, has approved that tariff adjustments had to be made; but only on the basis of guaranteed improvement in service.”

He added, “Under this new arrangement, only customers with a guaranteed minimum of 12 hours of electricity can have their tariffs adjusted. Those who get less than 12 hours of supply will experience no increase. This is the largest group of customers.”