• Thursday, November 30, 2023
businessday logo


Remove fuel subsidy to end cross-border smuggling

Nigeria-South African chamber of commerce wants regulatory bodies to fight smuggling

The continued smuggling of petroleum products from Nigeria to other countries amounts to economic sabotage and must be stopped by all means possible. The illegal business has put pressure on the Nigerian National Petroleum Corporation (NNPC), to meet the national daily products’ demand. Of the estimated 100 million litres daily production, 52 million litres is the estimated local consumption while about 48 million litres are allegedly smuggled outside the country on daily basis. To end this malaise, government should deregulate the sector and do away with fuel subsidy.

Whereas the product is sold at N162 to N165 per litre in Nigeria, the smuggled product goes for between N300 and N500 per litre in Cameroun, Chad, Niger, and Benin Republics .The huge price differential across the border provides adequate incentive of about 194 percent for smugglers.

Already, the country is presently in a state of bleeding as it cannot sustain the humongous amount put at between N140billion to N150 billion being spent monthly to subsidize the volume imported into the country. As long as the volume goes up that money would continue to increase. Therefore, the only solution is to bridge the gap and remove the incentive. If not, it will continue.

Read Also: Nigeria must tackle smuggling to sustain agric growth, investments as borders reopen -Experts

Petroleum products smuggling has a long history and is thriving at the detriment of our national economy. In the past, several efforts were made by the government to stop the illegal trade. These included the deployment of additional patrol troops to the borders and closure of filling stations 20km to the border towns. Regrettably, despite the aforementioned security measures, smuggling still goes on.

That the federal government has eventually realized the injury smuggling inflicts on our economy is commendable. In the past, government officials tended to simply look away.
While there are hopes that the on-going collaboration between the NNPC, EFCC and other security agencies to tract trucks loading products at the depots would reduce the rate of the illegal trade, more proactive measures need to be implemented quickly. This includes complete deregulation of the oil and gas industry and the passage/signing into law of the long delayed Petroleum Industry Bill (PIB).

Related News

However, even if subsidy is removed and the industry deregulated, not much would make sense without our knowing the actual production and consumption of fuel in Nigeria.

The background to smuggling in Nigeria is because the country is an oil-producing nation and the federal government subsidizes fuel. This is the most important social benefit it provides to its people. At official petrol stations in Nigeria, petrol thus only costs about half of what customers pay in other West African countries. The price difference means people in neighbouring west African countries prefer smuggled fuel even though it is often of lower quality due to adulteration. And the patrons and sponsors are powerful Mafia with links to influential politicians and bureaucrats.

In 2019, the federal government through the Department of Petroleum Resources (DPR) ordered the immediate suspension of operations of all petroleum products, retail outlets within 20kms along Nigeria border area until further notice. Also suspended was the processing of application for Approval to construct (ATC) and License to Operate (LTO) within 20kms along Nigeria border areas.
We, however, do not believe that the closure of stations within 20 kilometers of the border was the most effective means of combating smuggling as we believe that broader sustainable solution needed to be interrogated and implemented to finally, resolve the challenge of fuel smuggling.

This is one big question that we try to answer ourselves because when we look at the number of load-outs from our depots every day, we know that we don’t have that level of consumption of petroleum products in Nigeria.

When you say that Nigerians are consuming 60 million litres, and you look at the number of cars on the Nigerian roads, you will know that those 60 million litres cannot be possibly consumed in Nigeria.

And as the minister of state for petroleum resources Timipre Sylva recently stated, time has come for the government to track products that go out from its depots to ensure they deliver straight to designated filling stations in the country.