Fuel: West African Marketers Profit From Nigeria’s Subsidised Pump Price – SundiataPost
February 6, 2018
(Sundiata Post) — Nigeria is not only the biggest country in Africa; it is also the continent’s most foolishly generous. With 20 million litres smuggled out of the country daily, Nigeria’s subsidised petrol is a favourite commodity on West Africa’s black markets.
The sale of illicit Nigerian petrol has become widespread across the West African sub region helping to oil black markets and distorting price mechanisms of these countries. Nigeria’s retail price peg of N145 per litre is not only hurting investments in the downstream sector, it is encouraging smuggling across its porous borders.
On roadsides in Cameroun and other West African countries, vendors fill customer’s car, using the cut-off top of a plastic bottle as a funnel. The fuel is less expensive with a 30 litres of petrol costing FCFA 17,000 in the country rather than FCFA 19,000 at the pump according to a report by African Arguments, a pan-African news platform on issues plaguing Africa. This translates to N382 per litre on the streets and N426 per litre at the pump.
With landing cost of petrol in Nigeria put at N171 per litre, the Nigerian National Petroleum Corporation (NNPC) incurred N37 on each litre of fuel at a depot price of N133.80, leading to a daily subsidy of N2.046billion for 55million litres. The landing cost of petrol has been higher than the pegged retail price of N145 per litre, after crude oil prices rose to $45 per barrel in January 2017.
This puts total subsidy spends since February 2017 to date at N746.79billion, according to BusinessDay calculations. There is no better manual on how to self-destruct an economy. This figure is higher than budgetary allocation for the ministry of Power, Works and Housing (N555.88bn), transportation (N263.1bn), Agriculture and Rural development (N118.98), Universal Basic education (N109.6bn) and combined capital expenditures for defence (N145bn), health (N71.11bn) and education (N61.7bn) according to an analysis by SBM Intelligence.
On January 24, the Nigerian National Petroleum Corporation (NNPC) raised alarm over the sustained nefarious activities of some cross-border fuel smuggling syndicates that makes it difficult to account for about 20 million litres of fuel a day. Maikanti Baru, Group Managing Director of the state-owned corporation, told the Joint National Assembly Committee on Petroleum Downstream that if the activities of the fuel truck diverters and smugglers were left unchecked, it would constrain local supply.
Worse still, the economies of these neighbouring countries, such as Benin, Ghana and Togo are feeling the squeeze. At the 11th edition of Oil Trading & Logistics Expo that held in Lagos from October 23 – 25, Mohammed Amin Adam, deputy minister of Energy Ghana while delivering the keynote address, said Nigeria’s regulated price is distorting price mechanisms in the region. Adam said that policy is not only unsustainable but creates problems for its neighbours. Adam argued that since Nigeria constitutes the region’s biggest market, its policies has serious impact for other countries in West Africa.
“On this note, I wish to call on the Nigerian government to make efforts at reaching full price deregulation given that it is the largest market for products on our continent and any failure at reaching full price deregulation will lead to distortion on the sub regional market on the continent,” said Adam.
Petrol smuggled from Nigeria is known as “Funge” or “Zoa Zoa”, in Cameroon’s North West region.
“When police officers raid this area and collect bribes from vendors, they increase prices to make up for what they paid to the police,” someone patronising the roadside fuel sellers told Africa Arguments. In the city, buyers say price is far from the only benefit to buying petrol in this way.
“We don’t only buy because it is cheaper,” he says, “but also because it is available everywhere and at all times.”
Despite the fact that Cameroon is one of Africa’s biggest oil-producers and sold 17 million barrels
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