• Friday, December 01, 2023
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Petrol smuggling worsens, drains NNPC supply

The smuggling of subsidised petrol across Nigeria’s borders is emerging as the hottest gig in town as housewives, teenagers, bike riders have joined fraudulent marketers in the illicit trade, BusinessDay has learnt.

Across borders made porous by both uneven terrain and corrupt Customs officials, large volumes of petrol are being smuggled to Cameroon, Ghana, Benin Republic and as far as Sudan.

This is said to be complicating the efforts of the Nigerian National Petroleum Company to plug the supply gap that was created when, along with its partners, imported adulterated petrol into the country in January.

Oil marketers who spoke to BusinessDay say the low-grade smuggling of tiny volumes of petrol in 50-litre containers is adding up and making a dent in local supply.

“It is becoming a free-for-all,” the head of an oil marketing firm told BusinessDay.

Fuel queues in Lagos, Abuja and other cities across Nigeria have driven up transport costs, causing disruption to the lives of many Nigerians.

Read also: Nigeria’s petrol subsidy set to surpass N3.36tn oil revenue

Last month, the NNPC said it had over one billion litres of safe petrol in its stock for nationwide distribution. It added that 2.3 billion litres of PMS would arrive in Nigeria by the end of February to restore sufficiency.

With the large-scale theft of subsidised petrol currently happening in the country, NNPC’s effort to plug this gap in the market seem futile, marketers said.

In January, oil prices started rising on account of supply disruption in Libya. Prices rose to $90 per barrel, driving up the refining cost and the cost of refined products.

Average petrol prices around Africa was N515.20 or $1.24 as of January 31, the Major Marketers Association of Nigeria said in its monthly newsletter.

However, Nigeria’s retail petrol price remained between N162 and N165, and was enforced in major cities of Lagos, Abuja, Port Harcourt and others. Outside the major cities, the retail price of petrol hovered above N170 per litre.

“This price differential is an incentive for smuggling, where petroleum marketers divert supplies across the numerous illegal border crossings into neighbouring countries,” said analysts at SBM intelligence.

As a fallout of the Russia-Ukraine crisis, oil prices soared as high as $130 per barrel on March 6 before retreating below $111.6 per barrel as of 5:38 pm Nigerian time on Friday.

Across neighbouring African countries, the retail cost of petrol has risen above N600, driving up the smuggling of Nigeria’s petrol to them.

In Nigeria, the government is breaking its back to pay for subsidies. The landing cost of petrol has risen above N300 per litre, and using the official exchange rate of N416.46/$ and supply estimates of 60 million litres daily, Nigeria could be paying over N10bn daily as subsidy.

“Continuous payment of fuel subsidy is not sustainable,” said Ese Osamwonyi, senior energy analyst at SBM Intelligence.

The 2022 subsidy payments were initially estimated at N3 trillion. But the new record oil prices could see Nigeria paying far more than this by the end of the year if prices persist.

“Irrespective of the increase in subsidy payment, transportation costs have continued to rise. The lack of political will remains the main driver for the continued payment of fuel subsidy. There is no economic justification for fuel subsidy payment,” Osamwonyi said.

According to NNPC’s latest presentation at Federation Accounts Allocation Committee (FAAC) meeting, the value of PMS shortfall in December was N176.48 billion, plus the outstanding value shortfall recovery of N33.90 billion accrued over 2021.

The oil firm said it would deduct N242.5 billion (about N143.7 billion for January 2022 recovery and November spot arrears of N98.8 billion) during next month’s FAAC meeting.

FAAC allocation declined by 17 percent to N574.668 billion in January 2022, and analysts say this could worsen.