Nigeria’s oil sector continues to grapple with the persistent issue of fuel smuggling, despite recent changes in the country’s fuel subsidy policy.
Why Fuel Smuggling Is Still Thriving
Even after the removal of the fuel subsidy, smuggling remains a lucrative business for criminals due to the vast price difference between Nigeria’s domestic fuel prices and those in neighboring countries. According to Nigerian authorities, the country’s relatively lower pump price for fuel provides an irresistible incentive for smugglers to illegally transport Premium Motor Spirit (PMS) across borders.
Price Discrepancies Drive Smuggling Operations
The Comptroller General of the Nigeria Customs Service (NCS), Adewale Adeniyi, recently highlighted the problem during the NCS’s first-quarter performance review in Abuja. He noted that despite the fuel subsidy removal, fuel smuggling operations have not waned because the price of fuel in Nigeria remains significantly cheaper than in neighboring countries like Cameroon, Niger, and the Benin Republic.
While the cost of PMS in Nigeria is between ₦880 and ₦950 per liter, Adeniyi pointed out that the same product is sold for much higher prices in these neighboring nations, with fuel prices ranging from ₦1,600 to ₦2,000 per liter.
“This arbitrage creates a strong incentive for smugglers,” Adeniyi explained, referring to the considerable price gap that fuels the smuggling trade. Despite the lowering of fuel prices in countries like Cameroon, where prices are now around ₦850-₦900 per liter, the disparity is still significant enough for smugglers to profit. For example, fuel is sold at around ₦2,000 per liter in Niger, and ₦1,600 per liter in the Benin Republic.
The Whirlwind Initiative: A Strategic Response
In response to this escalating issue, the Nigerian Customs Service launched the Whirlwind Initiative—a strategic operation aimed at curbing the illicit export of Nigerian fuel. The initiative is designed to target smuggling routes and disrupt the networks that facilitate these illegal activities.
The Fuel Price Landscape: A Year in Review
Before the removal of the subsidy in 2023, the price of fuel in Nigeria was ₦238.11 per liter. By May 2024, this had risen to approximately ₦770 per liter, and it currently stands at an average of ₦900 per liter. Despite these increases, the price of fuel in Nigeria remains substantially lower than in neighboring countries, continuing to make smuggling an attractive and profitable enterprise for criminal syndicates.
As Nigeria’s fuel price continues to climb, the country faces the ongoing challenge of balancing its energy needs with curbing the illegal activities surrounding fuel exports. The government, through initiatives like Whirlwind, aims to stem the flow of smuggled fuel and protect both the country’s energy resources and its economy.
