NAIRA METRICS
Article summary
- The fuel pump price increase in Benin Republic immediately after Nigeria ended its fuel subsidy regime, increases the likelihood of fuel being successfully smuggled to neighboring countries.
- There may still be arbitrage opportunities for smugglers and rent seekers because of the higher prices in the Benin Republic.
- So, the best way to tackle this would be with the use of nanotechnology as suggested by KPMG Nigeria.
KPMG Nigeria has said that fuel pump prices have increased to 800 CFA ever since Nigeria put an end to its fuel subsidy regime.
The company stated this in its June 2023 report on “Removing Fuel Subsidies in Nigeria”. According to KPMG, this could be an indication that Nigerian fuel was being smuggled out to neighboring countries during the era of fuel subsidies.
A part of the report stated:
- “A key challenge throughout the implementation of the PMS subsidy regime was tracking precisely how much-subsidized fuel was consumed by Nigerian consumers and how much leaked into the markets of neighboring countries that did not have such subsidies.
- “Indeed, in response to the PMS subsidy removal by President Bola Tinubu, GCFR, pump prices in the Republic of Benin almost doubled from 450 CFA to 800 CFA, underscoring the widespread belief that significant quantities of subsidized PMS were smuggled out of Nigeria into neighboring countries.”
Backstory
Recall that Mele Kyari, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited recently said that Nigerian fuel was smuggled and sold in various neighboring countries, including Sudan. He cited an example saying the margin for four trucks of 60,000 liters of fuel taken from Lagos to Maiduguri legitimately was about N300,000. Meanwhile, the margin for sale of the same number and capacity of fuel across the Nigerian border is about N12 million to N17 million.
According to the KPMG report, given the relatively higher prices that persist in Benin Republic compared to Nigeria, there may still be arbitrage opportunities for smugglers and rent seekers to continue to smuggle fuel out of Nigeria across the border to its neighbors…
