The deregulation of Nigeria’s downstream petroleum sector has transformed a critical informal economy, leading to a remarkable 50% reduction in petrol consumption. For years, subsidised petrol prices in Nigeria attracted traders from neighbouring countries like Cameroon, Chad, Ghana, Benin, and Togo, who would purchase fuel at significantly lower prices and smuggle it across borders for profit.
This practice not only robbed the government of vital tax revenues but also perpetuated corruption within the Nigerian National Petroleum Company (NNPC) and complicated subsidy claims. According to recent industry data, petrol consumption plummeted from an average of 69.5 million litres in May 2023 to 35 million litres by September 2024.
Tunde Leye, a senior energy analyst at the Lagos-based Center for Development Studies, noted, “People smuggle because they have historically got the commodity cheaper here in Nigeria and can make a reasonable margin selling to neighbouring countries even after all costs are considered.”
As deregulation allows for market-driven pricing, Leye suggests that smuggling will become less enticing as competition increases. With recent petrol price hikes by the NNPC and a shift towards sourcing fuel from the Dangote oil refinery, the landscape is changing.
Joe Uwakwe, former chairman of the Society of Petroleum Engineers, pointed out that before deregulation, Nigeria was losing 18 million litres daily to smuggling. The former chairman cautioned that continuing subsidies only benefit neighbouring countries, making it crucial for the Nigerian public to understand the broader implications of these policies.
The government’s commitment to addressing these challenges is essential for establishing a transparent and efficient petroleum sector.
