Fuel Smuggling: A New Dawn With Subsidy Removal

Fuel Smuggling: A New Dawn With Subsidy Removal
A tricycle specially designed for fuel smuggling is parked close to the Nigerian-Benin border post in Seme-Kpodji, the Republic of Benin on April 6, 2019

There are projections that the removal of fuel subsidy this year would lead to an end of the risky, yet hugely rewarding, business of smuggling premium motor spirit (PMS) across the nation’s borders.

A litre of gasoline is between N162 to N185 in Nigeria depending on the location, but in Chad it’s being sold for about N391. The Benin Republic sells at N385, in Cote D’Ivoire it’s about N454 and in Ghana the product sells for about N400. So, it’s almost three times the price in Nigeria. The federal government has managed to subsidize the cost of PMS over the years but the fiscal burden has become severe amid huge smuggling activities.

In May last year, the Nigerian National Petroleum Corporation (NNPC) announced that they would no longer make contributions to the Federation Accounts Allocation Committee (FAAC) which they normally do on a monthly basis to be shared by the three tiers of government. The major chunk of government revenue in Nigeria is contributed by NNPC from crude oil sales, Federal Inland Revenue Service (FRSC) from taxes and Nigerian Customs Service (NSC) from import duties.

Speaking with MMS Plus recently, the Customs Area Controller, Ogun 1 Command, Comptroller Dera Nnadi stressed that it is erroneous to associate and characterize land borders, especially the Ogun region by smuggling.

He, however, alluded to the fact that PMS smuggling was one of the ills officers of the Nigeria Customs Service (NCS) have to combat in the terrain.

The Chief Executive Officer of the Financial Derivatives Nigeria Company, Mr. Bismarck Rewane has opined that the Idiroko fuel smugglers and their counterparts across the nation’s border regions will be out of business with the deregulation of PMS.

A motorcyclist in an attempt to smuggle fuel across the Idiroko border in December, 2021.

Rewane, who was the keynote speaker on Thursday at a webinar organized by First Bank Plc on Nigerian Economic Outlook for 2022, asserted that the removal of fuel subsidy would mark the end of smuggling the product across borders.

While these are exciting postulations for the nation, especially the Customs officials saddled with the risky task of chasing and recovering fuel from die-hard smugglers, there are concerns that the burden of petroleum subsidies on government finances may persist in 2022 despite the PIA as it is doubtful that the government will be able to exercise the political will to effect the removal of petroleum subsidy given the impending 2023 elections.

On account of political exigencies and push back by the ruling party and labour, the economy may have to bear the heavy fiscal burden of subsidy in 2022, experts posit.

The immediate-past Director General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf made this claim while interacting with our correspondent last week, noting that there might be delays in the full implementation of the PIA and reform of the downstream oil sector.

However, if the Dangote refinery comes on stream in 2022, the fiscal pressure may abate, but it would not be completely eliminated.

Fuel subsidy has cost the nation massive fiscal losses over the years with foreign loans required to maintain the subsidy payments while the regime encourages smuggling of the product. Nevertheless, the reaction of the Nigerian populace remains unknown as the last attempt to remove petrol subsidy failed in 2012.

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