- 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.”
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.
What you should know
The KPMG report suggested that the use of Nanotechnology to track the movement of Nigerian fuel across borders may provide Government policymakers with enhanced information for evidence-based decision-making.
The KPMG report highlighted the fact that significant progress has been made in vehicle tracking systems which can provide real-time data on vehicle location, fuel usage, and fuel source. Relevant interventions include linkages to the Vehicle Identification Numbers and Global Positioning System tracking can be used to prevent the misuse of fuel products for personal use.
The report stated that the use of nano-infused fuel additives and other materials may be used to track and trace fuel from port to fuel station forecourts, and indeed, to smuggle supplies across borders to neighboring countries. The report also suggested that Nano-sensors can also be used to track fuel levels in each vehicle’s fuel tank to prevent disruption of traffic flows and limit delays for passengers.