Market glut as EFCC goes after petrol kings

Africa’s biggest oil producing country is currently swimming in an excess supply of petrol because of the move by the Economic and Financial Crimes Commission (EFCC) to lock a lucrative black market for petrol smuggling and fish out “Petrol Kings.” This new phrase is used to describe petrol marketers who lift more product than the capacity of their filling stations.

After months of playing the ostrich, the Federal Government through the EFCC is hunting down petrol smugglers and crude oil thieves, whose activities have bloated Nigeria’s domestic petrol consumption by more than 40 percent to 103 million litre per day.

The current petrol glut is as a result of the decision by the anti-graft agency to track the financial points of all high-volume Premium Motor Spirit (PMS) transactions alongside the stern reputational image of current EFCC’s chairman, Abdulrasheed Bawa, who is spearheading the process via a special operation called “Operation White.”

This development is sending shivers across smugglers, therefore, retaining all previous smuggled product in Nigeria.

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“Everybody is currently afraid; Those who own depots or take huge volumes are now being asked to financially account for where or whom they sell PMS to,” a business leader in Nigeria’s downstream sector, says.

Another source close to the anti-graft agency confirms that some marketers have been quizzed already and are currently being interrogated for smuggling activities across the borders.

An exclusive industry data seen by BusinessDay show some marketers have been loading more petrol than they can account for given the number of petrol stations they have.

For instance, in the month of May, A.A RANO Nigeria Limited with less than 100 filling stations lifted Nigeria’s highest petrol of 169.7 million litres while Total Nigeria plc, the only international oil company in Nigeria’s downstream sector with an extensive distribution network of over 570 service stations nationwide, lifted 17.2 million litres of petrol.

There are also alleged concerns about why A.Y.M Shafa Limited, a company with less than 100 filling stations lifting as high as 107.9 million litres of petrol or Matrix Energy, a company with less than 60 filling stations lifting as high as 102.6 million litres of petrol.

Other sources say there is some element of round tripping going on with vessels importing petrol into Nigeria, as some are allegedly report a portion of their cargo while the balance is either taken across the borders or is recorded as fresh supplies.

“In the past, to get petrol you pay and wait to pick from the depot or you send a smaller vessel to meet the mother vessel at sea to pick up supply. Now, you do not need to wait after paying to get delivery,” source says.

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Also, market analysts say the announcement by Nigerian National Petroleum Corporation (NNPC) that there is no plan to increase the official pump price of petrol from N162 per litre in July is also another factor causing glut in the market.

“Marketers who have previously made arrangements for hoarding will now be forced to release products into the market,” Charles Akinbobola, energy analyst at Lagos-based Sofidam Capital, states.

Most stakeholders admit that while the economics has never been more in favour of ditching the costly subsidy practice, the politics behind keeping it is more intense than ever before.

“The cost of stopping smuggling is getting higher than the cost of subsidy, which is unsustainable,” Niyi Awodeyi, CEO at Subterra Energy Resources Limited, notes.

Despite government shut down of all filling stations within 20 kilometres of the border communities, smart fuel smugglers devised tactics to outsmart the system and create other routes of transporting petroleum products to neighbouring countries where they sell at higher prices to make huge margins.

Data obtained for a five-year period from the Energy Information Administration (EIA), a United States independent global statistics and analysis site, reveal that Cameroon, a border nation with Nigeria, with 25.886 million people as at 2019, has consistently produced crude oil between 2016 and 2020, but no record of petrol or natural gas.

It had 92 million barrels per day of crude oil in 2016. This declined to 76mbpd in 2017, down to 69mbpd in 2018, and 70mbpd in 2019 and further dropping to 67mbpd in 2020.

Another data seen by BusinessDay agrees with official data that showed some border states consuming more litres of petrol than other states with higher economic activities or bigger Internally Generated Revenue (IGR).

For instance, Ogun State, a state with a relative lower IGR per capital of N7,140 in 2020 who also shares border with Benin Republic consumed more petrol of 99.5 million litres monthly compared with Rivers State who consumes an average of 68.9 million monthly, despite boasting of a higher IGR per capital of N22,505.

In one of the South-South states, the smugglers moved from land-based to sea-driven operations.

Operating between the town and the border town of Ekok in neighbouring Cameroon, the smugglers resorted to adding extra tanks to their vehicles to conceal petroleum products.

Popularly referred to as ‘mappers’ by those who are informed about the illicit trade, the smugglers hide as much as 100 litres of petrol in their extra tanks.

To solve the problem, Mike Osatuyi, national operations controller, Independent Petroleum Marketers Association of Nigeria, says the passage of the PIB into law would mark the beginning of the repositioning of the oil and gas industry.

“If the President assents to it, then that is the beginning of the reform that we have been expecting in the oil and gas industry. It is the beginning of deregulation in the downstream sector,” he states.

“A deregulated downstream sector will permanently solve smuggling,” Billy Gillis-Harry, national president, Petroleum Products Retail Outlets Owners Association of Nigeria, states.

Over the years, Nigeria, Africa’s largest oil exporter, imports all its petrol, a sore point for the government with one of the worst macroeconomic environments in its country’s recent history.