The removal of petrol subsidy in Nigeria has effectively removed the incentives enjoyed by smugglers, said Nigerian National Petroleum Company Limited (NNPC Ltd) Group Chief Executive Mele Kyari.
Kyari, who spoke in an interview with Channels TV on Sunday, explained that the subsidy created a price disparity between Nigeria and its neighboring countries, making gasoline smuggling very profitable.
“Before the elimination of subsidies, the price difference was enormous and that incentivized smugglers to transport fuel across borders. The removal of the subsidy has effectively calibrated fuel prices, eliminating the profitability of smuggling,” Kyari said.
He noted that the removal of fuel subsidies in Nigeria has been a game-changer in the fight against cross-border smuggling.
For decades, he said, the subsidy created a lucrative opportunity for smugglers to profit from the price difference between Nigeria and neighboring countries.
“This is a positive development for Nigeria's energy sector as it can help ensure that consumers pay fair prices for fuel. Over the last forty-odd years, PMS has always been subsidized, and the subsidies are creating arbitrage, meaning there is a difference between prices in one place lower than they should be somewhere else.
“And when the President announced the subsidy in June, what he did was recalibrate the price. There is no longer any value in someone taking the product across the border. If you do, you won't make those profits,” he said.
Article page with financial support promotion
Background
In his inaugural address on May 29, 2023, President Bola Tinubu announced the removal of the subsidy to relieve the government of a significant financial burden.
This development caused hardship to many Nigerians with the consequent increase in prices of goods and services.
Mr Tinubu's announcement led to an increase in the price of petrol from N197 per liter to between N480 and N570, which immediately led to an increase in transport fares and prices of goods and services in the country. In July 2023, the price of petrol at the pump was subsequently revised upwards to N617/litre at various NNPC Ltd outlets.
In early September, petrol prices at the pump rose to N897 per liter at various NNPC Ltd outlets.
Last Wednesday, PREMIUM TIMES reported that petrol prices at the pump increased to N998 and N1,030 per liter at various NNPC Ltd outlets in Lagos and Abuja respectively.
READ ALSO: Gasoline subsidy removal is challenging but necessary – Tinubu
That development followed NNPC's decision to terminate its exclusive offtake agreement with Dangote Refinery.
The NNPC had claimed in September that it was purchasing petrol from the Dangote refinery at N898.78 per liter and selling it to marketers at N765.99 per litre, assuming a subsidy of almost N133 per litre. However, the company stated that this agreement is no longer sustainable.
The NNPC pumped about 103 million liters of gasoline from the Dangote refinery between September 15 and 30. The refinery was able to load 2,207 of the 3,621 trucks sent to it during the analyzed period.
The vehicles transported only 102,973,025 liters of the 400,000,000 liters of gasoline planned to be taken out of the refinery at a rate of 25 million liters per day. That translated into just a 26 percent return, records seen by PREMIUM TIMES show.
Once NNPC ends its exclusive offtake agreement with the Dangote refinery, the company will no longer be the sole buyer and marketers will now be able to negotiate prices directly with the refinery.