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HomeNewsIs Nigeria subsidizing petrol consumption in neighbouring countries? 

Is Nigeria subsidizing petrol consumption in neighbouring countries? 

How true is the claim that Nigeria is subsidizing PMS consumption in other neighbouring countries? In January 2022, the Minister of Finance, Zainab Ahmed, declared that the daily PMS consumption rate was 65.7 million litres. The NNPC stated that the average daily PMS supply from January to August 2022 was 68 million litres based on truck-out data. But, the daily PMS consumption rate was 44.4 million litres. The difference was never delivered and reflected the padding of PMS consumption data for corrupt purposes. The Minister of State for Petroleum Resources, Timipre Sylva, argued that PMS smuggling was responsible for the discrepancy in data from different government sources. He stated, “The imported products come to Nigeria, and from there filters out of our borders to neighbouring countries. We are inadvertently subsidizing the whole of Africa.”

 

This IMF smuggling argument is premised on the price differential between PMS prices in Nigeria and neighbouring nations. The PMS price per litre in Nigeria is $0.573 while the prices in the neighbouring countries of Benin, Niger, Chad and Cameroon are $1.093, $0.976, $0.847 and $1.093 respectively. However, the area covered by Benin, Nigeria, Niger, Chad and Cameroon is not a free market zone where product supply react seamlessly with price stimuli. These are nations with market boundaries that constitute impediment to unrestricted price induced PMS volume flows. During the 2023 Presidential campaign, the Presidential Candidate of the All Progressives Congress (APC), Bola Tinubu, stated ““How can we be subsidizing fuel consumption of Cameroon, of Niger, of Benin Republic. No matter how long you protest, we are going to remove subsidy”. However, in 2023, the Ministry of Petroleum Resources, signed a memorandum of understanding (MOU) with Niger Republic for the importation of petroleum products.  There is obvious no smuggling of Nigerian PMS into Niger.

 

In September 2022, the Nigeria Customs Service questioned the PMS smuggling assumptions of the NNPCL and government. The NNPCL had claimed it loaded 98 million litres per day in trucks to meet the nation’s estimated 60 million daily PMS consumption needs. The Customs comptroller-general, Hameed Ali, asked “The issue of smuggling, if you release 98 million litres in actuality and 60 million litres are used, the balance should be 38 million litres. How many trucks will carry 38 million litres every day?”. Since it will require 1151 PMS tankers with 33,000 litres capacity crossing the borders daily, the smuggling argument broke down. A simple input output volume balance of petroleum products in the region shows that no PMS is smuggled into neighbouring countries. For example, Niger’s Zinder refinery has a 20,000 barrels per day (bpd) capacity. In 2015, Niger produced 15,280 bpd of petroleum products and imported 3,799 bpd for an input volume of 19,079 bpd. The country consumed 13,000 bpd and exported 5,422 bpd into Chad and Benin for an output volume of 18,422 bpd. Therefore, Niger had a net input of 657 bpd. Chad produced 0 bpd of petroleum products and imported 2,285 bpd for an input volume of 2,285 bpd. It consumed 2,200 bpd and exported 0 bpd for an output volume of 2,200 bpd. It had a net output of 85 bpd. 

 

Cameroon produced 39,080 bpd of petroleum products and imported 14,090 bpd for an input volume of 53,170 bpd. It consumed 42,000 bpd and exported 8,545 bpd for an output volume of 50,445 bpd. It had a net input of 2,725 bpd. Benin produced 0 bpd of petroleum products and imported 38,040 bpd for an input volume of 38,040 bpd. It consumed 44,000 bpd and exported 1,514 bpd for an output volume of 45,514 bpd. It had a net output of 7,474 bpd. The total net output of surrounding nations in the region was 4,177 bpd. In 2015, Nigeria produced 35,010 bpd of petroleum products and imported 223,400 bpd for an input volume of 258,410 bpd. It consumed 316,000 bpd and exported 2,332 bpd for an output volume of 318,332 bpd.  It had a net output of 59,922 bpd. Let us assume that the net regional output of 4,177 bpd from neighbouring countries was smuggled from Nigeria, there would still have been was a net output of 55,745 bpd which was never imported into Nigeria nor smuggled to neighbouring countries.

 

We have shown that no PMS is smuggled to neighbouring nations. This is an IMF argument to justify the corruption in the subsidy regime. In 2011, the average daily PMS consumption rate was 31.2 million litres, while the government paid fuel subsidy of 2,110 billion Naira on based on  an estimated PMS consumption rate of 56.9 million litres. The difference of 25.7 million litres per day was said to have been smuggled out of the country. In reality, this difference was due to companies making false subsidy claims on undelivered fuel. These corrupt practices were revealed by the 2012 Farouk Lawan House of Representative Ad-Hoc Committee investigation and report. The committee found payments for billions of litres of petrol that were never supplied, and more than $6.8 billion refunds due to the Treasury. The Federal government’s Aigboje Aig-Imoukhuede committee also indicted 25 companies. It identified an over payment of $2.5 billion and questioned an additional $1.5 billion worth of transactions. In 2012,  1,360 billion Naira was paid as subsidy for the importation of 43.1 million litres of PMS per day. But, the daily PMS consumption rate was 32.4 million litres. The remaining 10.7 million litres per day of PMS was never delivered. Nobody have gone to jail for this theft of public funds. PMS daily consumption rate should be measured with certified dynamic flow meters such Coriolis meters and a Supervisory Control and Data Acquisition (SCADA) system to eliminate the falsification or padding of PMS daily consumption data for corrupt purposes. If existing refineries are repaired and more refineries built, there will be no need for a PMS price hike under the guise of fuel subsidy removal.

 

Izielen Agbon

izielenagbon@yahoo.com 

May 13, 2023

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