Subsidy removal will discourage cross-border smuggling – Kyari

The removal of petrol subsidy in Nigeria has effectively eliminated the incentives enjoyed by smugglers, Group Chief Executive Officer of Nigerian National Petroleum Company Limited (NNPC Ltd), Mele Kyari, has said.

Mr Kyari, who spoke in an interview with Channels TV on Sunday, explained that the subsidy created a price disparity between Nigeria and its neighbouring countries, making petrol smuggling highly profitable.

“Before the subsidy removal, the price difference was huge and that incentivised smugglers to move fuel across borders. The removal of the subsidy has effectively calibrated fuel prices, eliminating the profitability of smuggling,” Mr 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 neighbouring countries.

“This is a positive development for Nigeria’s energy sector, as it can help to ensure that consumers are paying fair prices for fuel. In the last 40-something years, PMS has always been subsidised, and subsidy is creating arbitrage, which means there is a difference between prices in one location, lower than what it should be in another location.

“And when Mr President announced the subsidy in June, what he did was recalibrate the price. There is no longer any value in anyone taking the product across the border. If you do, you’re not going to make those profits,” he said.

Background

In his inaugural address on 29 May 2023, President Bola Tinubu announced the removal of the subsidy to relieve the government of a major financial burden.

The development caused hardship for many Nigerians with an attendant increase in the prices of goods and services.

Mr Tinubu’s announcement led to an increase in petrol price from N197 per litre to between N480 and N570, which immediately triggered a rise in transportation fares and prices of goods and services in the country. In July 2023, the petrol pump price was subsequently reviewed upward to N617/litre at various outlets of the NNPC Ltd.

Earlier in September, petrol pump prices rose to N897 per litre at various outlets of NNPC Ltd.

Last Wednesday, PREMIUM TIMES reported that petrol pump prices rose to N998 and N1,030 per litre at various outlets of the NNPC Ltd in Lagos and Abuja, respectively.

ALSO READ: Petrol subsidy removal challenging but necessary – Tinubu

That development followed NNPC’s decision to terminate its exclusive purchase agreement with Dangote Refinery.

The NNPC had claimed in September that it was buying petrol from Dangote Refinery at N898.78 per litre and selling to marketers at N765.99 per litre, shouldering a subsidy of almost N133 per litre. However, the company said this arrangement is no longer sustainable.

The NNPC lifted about 103 million litres of petrol from Dangote Refinery between 15 and 30 September. The refinery was able to load 2,207 of the 3,621 trucks sent to it within the period under review.

The vehicles carried just 102,973,025 litres of the planned 400,000,000 litres of petrol earmarked to be lifted from the refinery at 25 million litres per day. That translated to just 26 per cent performance, records seen by PREMIUM TIMES show.

With the NNPC ending its exclusive purchase agreement with the Dangote Refinery, the company will no longer be the sole off-taker, and marketers can now negotiate prices directly with the refinery.