Fuel Subsidy Encouraged Arbitrage, Smugglers Were Earning N17m Per Truck, Says NNPC Boss Kyari

Despite years of collaboration with security agencies under different codenames and with several billions of Naira gone down the drain, the Nigerian National Petroleum Company Limited (NNPC) has said that cross-border smugglers were freely making money under the erstwhile petrol subsidy regime.

In fact, the Group Chief Executive Officer of the national oil company, Mele Kyari, said in Abuja that petrol smugglers were making as much as N17 million per truck in neighbouring countries they smuggled the products to.

Snippets of a meeting with Kyari, relayed by Channels Television on Monday saw the GCEO reiterating that cross-border smuggling was rampant due to the fuel subsidy before the current administration.

The federal government, having now deregulated the petrol supply market is expected to tell Nigerians the exact litres of petrol consumed daily in the country. Smuggling, which it had also persistently blamed for moving of Nigeria’s fuels to neighbouring countries should also significantly reduce.

On August 9, 2018, the Federal Executive Council (FEC) approved the installation of technology monitoring schemes and structures under the Petroleum Equalisation Fund (PEF) for N17 billion.

The deployment of the automated fuel system management and censor network, the government said, would ensure 100 per cent tracking and monitoring of petroleum products.

In addition, the government said that the system would enable Nigerians to know  how much petrol is consumed in Nigeria; volumes of products moved out illegally and the whole impact on the Federation Account Allocation Committee (FAAC).

However, the N17 billion automated fuel system management was never installed and  if it was, never worked.

Apart from the acquisition of the software to stop the smuggling of petroleum products from Nigeria, the NNPC also embraced the suggestion to establish mega stations in the neighbouring countries, a policy that was later discarded.

Senior lawyer, Mr Femi Falana, recently argued that the measures were deliberately sabotaged in order to boost the smuggling of petrol from Nigeria by the Nigerian authorities.

But Kyari, while defending the removal of subsidy, said that for decades the system allowed arbitrage, arguing that while a tanker to Maiduguri will make a profit of roughly N500,000, cross-border smugglers were making about N17 million per load.

Kyari said: “In the last 47 years, PMS (Premium Motor Spirit) has always been subsidised and subsidy is creating arbitrage. That means there is a difference between price in one location, lower than what it should be in another location.

“And when Mr. President announced the removal of subsidy in June, what he did was to recalibrate the price. There is no longer any value in anyone taking the product across the border. If you do, you’re not going to make those profits than you do.

“In a 6,000-litre truck, you can actually gain up to  N17 million from just one truck. How are you going to stop someone who with two trips can just easily make  N17 million times two—which is the price of the truck itself?”, he argued.

Aside from all the other initiatives launched with fanfare, in 2019, the NNPC launched ‘Operation White’, to, according to the oil firm, monitor and track every molecule of petroleum products imported into the country and follow it through to the pump. This also did not work.

“However, when you take a truck legally maybe N8 million, say, to Maiduguri, the legitimate value you have is less than N500,000. Why will I see  N17 million and then take all the trouble go to Maiduguri, keep it in the fuel station for one month and then make  N3 to  N4 million,” the NNPC boss asked the television station.

 Falana has variously argued that the federal government was ridiculing itself by suggesting that it cannot halt the illegal smuggling of petroleum products across the borders. In Nigeria, like in other countries, the federal government controls the armed forces and other paramilitary organisations.

The Nigeria Customs had also launched ‘Operation Whirlwind’ to stop the menace, arguing that being among the countries with the cheapest PMS in the African region, the situation has created a lucrative black market for smugglers.

But Kyari said that the removal of petrol subsidy in Nigeria had effectively eliminated the incentives enjoyed by smugglers, insisting that the retention of subsidy made petrol smuggling highly profitable.

“This is a positive development for Nigeria’s energy sector, as it can help to ensure that consumers are paying fair prices for fuel, “ he argued.

In his inaugural address on 29 May 2023, President Tinubu announced the removal of the subsidy to relieve the government of a major financial burden, causing serious inflation and hardship for Nigerians.

From the N194 per litre he met it, Tinubu has now moved the pump price to over N1,000 per litre, with the hope that it will end government subsidies and end smuggling across the borders. The former is yet to be seen.

Emmanuel Addeh

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