-By Teddy Nwanunobi
Nigeria is Africa’s largest exporter of oil but it still has to import almost all its fuel needs, due to lack of refining capacity. As if the loss from its lack of refining capacity is not enough, it is still losing so much daily to smugglers who have become more daring, with each passing day.
A BudgIT report had indicated that an estimated 42 million litres of petrol was smuggled from Nigeria to neighbouring West African countries daily – a trend that showed that the country may have lost not less than N2.53 trillion to this menace in the last one year.
The unbridled smuggling has not only increased Nigeria’s estimated daily consumption of the Premium Motor Spirit (PMS), but it has also partly caused the Nigerian National Petroleum Corporation (NNPC) to remit almost nothing into the federation account on some occasions, lately.
Presidential concern
On Thursday, June 10, 2021 President Muhammadu Buhari, who doubles as the Minister of Petroleum Resources, in what appeared to be an indictment on various agencies that are stationed at Nigeria’s borders, linked the country’s rising subsidy payment to cross-border smuggling of the country’s PMS. Buhari, who spoke during an interview on Arise Television, responded to a question from the Chairman of ThisDay, Nduka Obaigbena, who noted that cross-border smuggling of PMS had contributed to the hike in the amount of money spent on subsidy.
“Even when we close the border, they (smugglers) ride on machines, through the bush, to smuggle the product (petrol). We see Nigerian petrol in some West African countries,” Buhari said.
The Group Managing Director (GMD) of the NNPC, Mallam Mele Kyari, who confirmed Buhari’s concern, further expressed worry that the spiraling subsidy payment was directly proportional to the rising litres of the PMS, and had negatively affected the Corporation’s remittance to federation accounts. In a statement issued by the Corporation, Kyari maintained that smuggling was not a business that should be condoned.
“Because even for deregulated petroleum products, it brings extra cost burden on this country both in terms of safety and security of the foreign exchange. It even constitutes more burden to this country when the product involved is a regulated product like Premium Motor Spirit,” he said.
Kyari explained that, with the increasing price of crude at the global market, plus production cuts, Nigeria could not afford to shoulder the cost of smuggling.
“We all know that our daily consumption is not up to 60 million litres. We all know that, and that is why we have to pull it down. We will pull it down by every means necessary,” Kyari added.
There is no doubt that the rising subsidy payment has taken away a great chunk of crude benefits from the country. Even the International Monetary Fund (IMF), on Thursday, June 17, expressed concern about Nigeria’s move to renew fuel subsidies. It also urged the Federal Government to continue efforts to unify its exchange rates.
“The mission (IMF team) expressed its concern with the resurgence of fuel subsidies. The mission recommended maintaining the momentum toward fully unifying all exchange rate windows, and establishing a market-clearing exchange rate,” it said.
In reaction to the IMF’s concerns about Nigeria’s overburdening subsidy payment putting its economy at financial risk, Kyari noted that the rising crude oil for Nigeria presented a ‘chicken and egg’ situation for the country. He expressed concerns that the oil price was currently exiting the comfort zone set by the NNPC – a situation he said was creating a burden for the corporation already.
What Nigeria must know
Analysts have expressed worry that the rising subsidy payment has seen the Corporation remitted almost nothing into the federation account on two occasions.
“Nigeria must do away with the subsidy payment, which is more like eating the future. We must take that bold step now,” President of Major Oil Marketers Association of Nigeria (MOMAN) Adetunji Oyebanji, stated.
Compared to the average consumption figures of about 60 million litres in the country, the country is subsiding no less than 42 million litres of PMS daily, which were imported into the country then, illegally exported to neighbouring countries. At the current official price of N162 per litre, this amounts to no less than N2.53 trillion lost in the last one year.
Data from the National Bureau of Statistics (NBS) indicates that 57.23 million of petrol per day was imported into the country in 2019, and an average of 58.44 million per day in the first quarter of 2020. Yet, the Department for Petroleum Resources (DPR) has continued to put Nigeria’s average daily petrol consumption at 38 million liters per day.
But as always, rather than make some headway from the imported product, Nigeria continues to lose so much money to smugglers. With petrol subsidised in Nigeria, as against the deregulated prices in fellow nations, the development provides an incentive for perpetrators of the economic sabotage.
The NNPC noted that fuel smuggling was thriving due to the price advantage, since the product sells less in Nigeria. Neighbouring Chad, for instance, sells the cheapest petrol at the equivalent of N322, and industry sources are of the view that, using N300 per litre as the average figure, while in Nigeria the pump price is N165 per litre, and N162 from the official depots, leaving an incentive of N135 or more, hence the high level of smuggling.
The culprits, DPR’s efforts
Nigeria has 33,000 filling stations that are registered on the network of the DPR. But only 20.3 per cent has been registered on its Downstream Remote Monitoring Systems (DRMS). This is about one-fifth of the total registered filling stations in the country.
“So far, only 6,700 stations have been registered,” the Director/CEO of the DPR, Engr. Sariki Auwalu, disclosed.
The DRMS, also known as e-Station, is an inventory and regulatory tool that tracks product levels across retail outlets and depots. The system also tracks the movement of products from depots to retail outlets, using a USSD code *7117#.
Auwalu explained what the DPR intends to achieve with the DRMS.
“The DRMS app was developed in-house by DPR staffers to track products in order to curb cross border smuggling and diversion of products. We want every marketer to migrate into this platform and each of them will have their unique ID to monitor their activities,” Auwalu explained.
Auwalu, who hinted that the DPR has commenced capturing all licensed filling stations into its system to enable it track lifting and disposal of products to ensure they are monitored, therefore, warned that the remaining outlets that were yet to be captured will have their licenses withdrawn by December this year.
“No filling station licence renewal will be done. We have already told them that every filling station must key into the DRMS. We are migrating every filling station into the DRMS.
“The remaining 26,300 have till December, this year, to get on the network. It is now compulsory for all filling stations to be registered on our systems,” Auwalu warned.
Auwalu dropped the hint at a critical stakeholders’ engagement, which was attended by the Economic and Financial Crimes Commission (EFCC), Petroleum Equalisation Fund (PEF), Petroleum Products Pricing and Regulatory Agency (PPPRA) among others, in Lagos State.
He further warned that any filling station that fails to key into the platform will not be allowed to load at the depots.
The Director also expressed confidence that the DRMS would bring sanity to the downstream sector of the oil and gas industry, adding that the move would also go a long way to complement the efforts of sister agencies in their bid to regulate the industry.
“We have been able to capture so many diversions, check overloading, under-dispensing, and other illegal practices of operators because, with DRMS, we can track all the activities of these operators on our platform,” he added.
He stated that the move would also go a long way to complement the efforts of sister agencies in their bid to regulate the industry. Explaining the rationale of the engagement, Auwalu noted that the increasing diversion of petroleum products was becoming worrisome.
He pointed out that Nigeria was losing so much, and feeding her neighbours through illegal diversions. To this end, the DPR, he said, had to come up with a home grown technology to track genuine outlets, by assigning them unique numbers to make it difficult to divert products or to under dispense.
He, therefore, urged those operating illegally to present their facilities for capturing, as going forward only those captured by the system can lift petrol from depots.
To have 26,300 filling stations not captured in the DRMS, under the oil and gas industry, is like asking the rat to watch over the only fish that a poor old widow would need to prepare her last meal. The DRMS is the Department’s efforts towards curbing diversion of petrol, as the subsidy costs weigh down the Federal Government’s interventions, due to the rising consumption of the PMS that is occasioned by smuggling and sharp practices in the downstream sector. It is, arguably, true that this economic sabotage will continue for a very long time, if DPR does not put its foot on the throttle to drive home this measure to check and curb the menace of smuggling petroleum products that has been eating so much into the nation’s purse.
It is also encouraging to see the DPR getting supports from sister agencies.
In his response at the event, the Chairman of the Economic and Financial Crimes Commission (EFCC), Abdulrasheed Bawa, said that the stakeholders’ meeting was to strengthen the relationship with DPR for transparency and accountability in the oil and gas sector.
He pointed out the need to ensure the efficient management of the nation’s hydrocarbon resources.
“We need to engage with stakeholders, because this industry is the mainstay of the national economy, and we are proud to protect the resources,” Bawa, who was represented by the Director of Operations, EFCC, Abdulkarim Chukkol, said.
Bawa, who demanded the real time report from the platform for easy tracking of marketers, added that, as an agency with the mandate to track economic saboteurs, it was important for all stakeholders to work in synergy to deal with the scourge.
On his part, the Executive Secretary of the Petroleum Products Pricing Regulation Agency (PPPRA), Abdulkadir Saidu Umar, said that the operators and regulatory agencies must use the partnership as a veritable tool to achieve the mandate of the Federal Government to drive gas development.
Umar, who appreciated the DPR for engaging other stakeholders in the effort to rid the country of petrol diversion, called for closer monitoring to ensure unproductive stations that still hold licenses are not used to procure products and divert the same.
Also speaking, the Executive Secretary of the Petroleum Equalisation Fund (PEF), Ahmed Bobboi, demanded for technical collaboration between stakeholders for proper coordination.
Conclusion
Millions of PMS are stolen from Nigeria daily by smugglers, who are profiting from the dubious subsidy payments. Nigeria’s daily consumption rose from 50 to 60 million litres in 2020 to 93 million litres in April 2021. About N120 billion is spent on subsidy each month, eroding cash-strapped Nigeria’s scarce resources.
Data showed that the average Daily PMS Imported and Consumed in Nigeria in February 2021 was 50 million litres, while the average Daily PMS Imported and Consumed in Nigeria in May 2021 was 103 million litres. But experts have argued that between Chad, Niger, Cameroon, Togo and Benin Republic, the daily petrol consumption in these countries are not more than 8.6 million litres. According to a breakdown, Cameroon consumed 4.6 million litres, Niger 1.034 million, Benin Republic 1.031 million, Chad 00,000, and Togo 1.03 million.
Some analysts have questioned the efficiency of cross-border security outfits such as the Nigeria Customs Service (NCS) and the Nigerian Immigration Services (NIS), arguing that they cannot be exempted from the crisis.
While it looks like all agencies were cooperating to fight the menace, the National President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Elder Chinedu Okoronkwo, who spoke on the issue, recently, said that the Association had taken critical steps to curb the menace, but was not getting the desired cooperation from key agencies of government.
Okoronkwo, however, recalled that the current partnership being sought by the NNPC with security agencies should have been tailored towards strengthening existing cooperation the Association had sought long ago.
Buhari has directed all industry stakeholders to collaborate with the Corporation to ensure that the daily national petroleum products consumption, which shot up to 102 million litres in the month of May, was brought down to realistic levels of 60 million litres. He specifically directed the NNPC to work with the EFCC and other cross-border monitoring security outfits to curb the menace of cross-border petrol smuggling.
The President noted that the Federal Government was working assiduously to get the cooperation of the NCS, the NIS and other border agencies to halt cross-border smuggling of PMS.
According to him, the Customs and Immigrations services would help to reduce oil theft and smuggling.
“Customs are doing quite well in confiscating tankers of stolen petroleum products. The people that are dispossessed of these products don’t normally complain. They don’t talk to anybody, and they don’t say it,” he said.