Losses hit 11m litres daily in Sept, reduce in Nov
Inside the fuel smuggling ring — Reports
Use technology to curb menace, experts tell FG
By Michael Eboh
In May, officers and men of the Nigerian Navy arrested five Nigerians and three Ghanaians for allegedly attempting to smuggle 105 drums of Premium Motor Spirit, PMS, from Nigeria to Cameroun while another group of naval officers nabbed eight men trying to smuggle over 200,000 litres of petroleum products valued at over N50 million out of Nigeria.
The first set of five Nigerians and three Ghanaians were alleged to have sourced the PMS, also known as petrol, from Oron in Akwa Ibom State, while the second set of smugglers sourced the products from unapproved refining sites in the Niger Delta and were arrested on the Taraba jetty waterways while trying to take the products outside the country.
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Whereas arrests like these are common in Nigeria, they have not deterred unscrupulous individuals from engaging in the seeming lucrative trade of cross-border fuel smuggling which, over the years, has served as a drainpipe on the Nigerian economy.
Smuggling of petroleum products, especially PMS, has continued unabated and mainly unchecked in Nigeria for several decades and it has been stated several times that Nigeria was the major supplier of PMS, albeit unofficially, to countries bordering it, while it is also subsidizing fuel consumed in those countries.
This is especially as there is no official figure on the actual volume of fuel smuggled out of the country on daily basis.
Also, only small-time criminals down the ladder of the cartel get arrested while the kingpins walk free as they enjoy protection from security agents on their payroll.
After several efforts at strengthening security at border posts, and series of engagements with officials of neighbouring countries to check the fuel smuggling from Nigeria to these countries, the illegal activity persists and even reached alarming dimensions.
Particularly, this had resulted in a thriving market for Nigerian petrol in the neighbouring countries of Niger Republic, Benin Republic, Cameroun, Chad, Togo and even Ghana which has no direct borders with Nigeria.
And there are reports that smuggled fuel from Nigeria go as far as Mali, Burkina Faso and Cote d’Ivoire. This has given credence to the claim in some quarters that Nigeria is Africa’s biggest fuel smuggling market.
However, what many years of inter-governmental engagements and discussions could not achieve, the Federal Government was able to achieve in three months, with its decision to close the country’s land borders.
Fuel supply, lifting drop to 49m litres
Data obtained from the Petroleum Products Pricing Regulatory Agency, PPPRA, revealed that Nigeria’s fuel supply had dropped to an average of 48.54 million litres daily from 61 million litres daily before the closure of the borders.
Analysis of Daily Truck-Out Reports obtained from the PPPRA, from November 1 to November 13, 2019, showed that 663.485 million litres of PMS was lifted from depots across the country, averaging 51.04 million litres daily, a significant decline from the 61 million litres average daily truck out from August 5 to 11, 2019. Land borders were closed August 11.
However, from August 19 to 25, 2019, which fell within the first few weeks of the partial closure of the borders, the PPPRA said an average daily truck out figure of about 57 million litres was realised, which fell below the daily average figure for the week August 5 to 11.
Similarly, from August 26 to September 1, 371.82 million litres of petrol was trucked out, averaging a daily figure of 53 million litres, representing a decline of about four million litres when compared to the previous week.
The PPPRA further noted that the downward trend continued from September 2 to 8, when the daily average PMS truck out dipped to 50.22 million litres, indicating a further reduction of 2.9 million litres.
Smuggling hikes fuel supply
Corroborating the PPPRA’s claims, immediate past Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, in April 2019, declared that, prior to 2016, Nigeria’s fuel consumption averaged 35 million litres daily and had spiked to over 55 million litres per day.
Confirming this, the Nigerian National Petroleum Corporation, NNPC, stated that the activities of smugglers had led to an abnormal surge in the evacuation of petrol across Nigeria from less than 35 million litres per day, prior to 2016, to more than 60 million litres, which was in sharp contrast with established national consumption pattern.
The NNPC also raised the alarm on the proliferation of fuel stations in communities with international land and coastal borders across the country.
This development, it claimed, energized unprecedented cross-border smuggling of petrol to neighbouring countries, making it difficult to sanitise the fuel supply and distribution matrix in Nigeria.
It was observed from various studies that there was a strong correlation between the presence of the frontier stations and the activities of fuel smuggling syndicates.
Because of the obvious differential in petrol price between Nigeria and the neighbouring countries, it had become lucrative for smugglers to use the frontier stations as conduit for the smuggling of products across the border.
Implications for subsidy
The NNPC lamented that based on the heightened petrol consumption rate of above 50 million litres per day, the country was incurring N774 million daily as subsidy, also known as under recovery.
It expressed concern that continued cross-border smuggling of petrol would deny Nigerians the benefit of the Federal Government’s benevolence of keeping the retail price of PMS fixed at N145 per litre despite the increase in PMS open market price above N171 per litre.
Irrespective of several efforts aimed at containing the menace, the Nigerian fuel smuggling industry had, for decades, created and sustained a huge illegal fuel trading market around countries bordering it.
Specifically, Belgium-based Equal Times, in a report published in 2017, disclosed that Benin Republic, a country with a population of about 11 million people, relies on a vast illegal network that smuggles petrol from Nigeria for its fuel supply.
Illegal fuel markets
According to the report, Benin Republic cannot compete with oil prices in the neighbouring country and has insufficient service stations to cover its population’s fuel needs.
“This need has given rise to a very lucrative business opportunity. Four decades ago, Beninese smugglers began buying petrol from Africa’s leading oil producer, Nigeria, and illegally transporting it to their country. The petrol sold illegally on roadside stalls, at prices lower than the service stations, now supplies the whole country’s fuel needs”, the report said.
“The heads of this illegal trade have, over the decades, become increasingly popular and powerful in Benin. Politicians are appointed and ousted in function of their interests and the authorities’ stance towards them is permissive, corrupt or fearful”.
The report explained that the petrol trafficking route begins in Nigeria, where Benin’s smugglers fill their tanks and jerry cans at Nigerian service stations, adding that there are thousands of routes along the almost 800-kilometre long border that the traffickers use to take the petrol to Benin.
The fuel, the report claimed, is also carried via Lake Nokoué and the small rivers connecting Nigeria with Benin as well as clandestine sea routes in the Gulf of Guinea.
It emphasised that the trips may involve crossing police checkpoints, but the smugglers are rarely stopped, not less arrested, as the authorities give them free rein in exchange for small bribes, an amount usually settled on in advance with the big bosses of the illegal trade.
In yet another report by German-funded and Frankfurt-based advocacy organization, Development and Cooperation, fuel smuggling had become a lucrative business in Nigeria, from where it is purchased legally and then smuggled to Togo, where it is sold in a thriving black market.
The report stated, “In Lomé, the capital of Togo, it is common to see young people drive cars at breakneck speeds. The back seats have been removed and are packed with cans of smuggled petrol.
“The drivers are desperate to earn some money. Most do not have a formal education, and many do not have a driver’s license. Some drive under the influence of drugs. The young drivers supply petrol to the dealers’ network across the agglomeration.”
In Cameroun, smuggled fuel from Nigeria is more readily available and cheaper than fuel produced or sourced legally by the country, and is also the source of the illicit black market fuel trade in the country.
Specifically, reports obtained from the country’s Ministry of Energy and Water Resources revealed that Cameroun has 742 filling stations, with majority of the petrol stations located in just three of ten regions: Centre, Littoral, and West.
According to reports from the country, this leaves the other regions, including the South-West, which produces the vast majority of country’s oil, with fewer and inadequate petrol stations to meet their fuel needs.
Quoting data from the ministry, the reports noted that three of the South-West region’s six divisions do not have a single petrol station, including Ndian, the area responsible for 90 per cent of the country’s massive oil output.
Therefore, it has been stated that the illicit fuel trade in Cameroun, fuelled by smuggled petrol from Nigeria, cannot be stemmed until this lack of filling stations in Cameroun is addressed, especially as even the few that exist often go empty for months at a time.
Similar tales abound in Niger Republic, Chad and Ghana, where petrol smuggled from Nigeria is creating huge market for the illegal sales of petrol, with its attendant social ills, chief among which is organised crime.
Roles of frontier petrol stations
Fuelling the illicit trade, as earlier stated, is the proliferation of petrol stations across the border communities, a development which made the Comptroller-General of Customs, Colonel Hameed Ali (ret.) to order the suspension of fuel supply to these petrol stations.
Data obtained from the NNPC revealed that 16 states, having amongst them 61 Local Government Areas (LGA) with border communities, accounted for 2,201 registered fuel stations, with a combined fuel tank capacity of 144.99 million litres of petrol.
It was also observed that eight states with coastal border communities spread across 24 LGAs amongst the states account for 866 registered fuel outlets with combined petrol tank capacity of 73.44 million litres.
Further breakdown of the finding showed that among the states with land border, three LGAs in Ogun State account for 633 fuel stations with combined petrol tankage of 40 million litres while nine LGAs in Borno State have 337 fuel outlets with combined petrol storage capacity of 21.11 million litres.
In Lagos one LG which is a border community, has 235 registered fuel stations with total petrol storage facility of 19.916 million litres.
On the coastal front, Lagos with six LGAs leads with 487 registered fuel stations with combined in-built storage capacity of 50.24 million litres.
Akwa Ibom with five LGAs has 134 registered retail outlets with capacity to store 8.32 million litres, while Ondo State with two LGAs has 110 fuel stations with capacity to store 3.87 million litres.
With the borders closed and these stations starved of fuel, following the directives of government, fuel smuggling across the borders has hit an all-time low. Though, there are reports that truckloads of fuel are still passing through some of the borders at the dead of the night.
Speaking on the unending menace of fuel smuggling, Chairman of Petroleum Technology Association of Nigeria, PETAN, Mazi Bank-Anthony Okoroafor, called for a review of the security apparatus at the country’s borders, while he advocated the deployment of technology to address the menace.
He said, “Our borders have been porous for a long time. We need honest and dedicated border patrol officials. Government has shown by closing these borders that lots of our refined products find their way through these borders to neighbouring countries, hence the lower daily consumption rate of our refined petroleum products.
“Those vested with the responsibility of protecting our borders have failed. The entire people working in these borders need to be replaced. We need technology to fight this menace since people have failed us in protecting this illicit trading through our borders.”
Curbing smuggling with technology
On his part, Mr. Chinedu Onyeizu, an oil industry expert, insisted that efforts should be geared towards using advanced technology to track the products from the point of discharge to the point of sale to motorists.
Onyeizu, who also contested for the Senate in Abia State under the All Progressives Congress, APC, in the last general elections, said, “I will recommend we leverage technology in tracking both content and container of liquid fuel from the point of discharge at the ports to the fuel tanks of vehicles in Nigeria.
“This we can achieve by developing and deploying a digital decision support centre for PPPRA and then rolling out a policy statement that will ensure importers come on the platform.
“When this is done, product volumes are given unique identifiers and tracked real time.”
Border closure impacts fuel price
Meanwhile, in a report presented at the Monthly Lagos Business School’s Executive Breakfast Meeting for September 2019, Managing Director and Chief Executive Officer of Financial Derivatives Company Limited, Mr. Bismarck Rewane, claimed that following the closure of the border, petrol now sells for N144 per litre, while diesel price had dropped to N210 per litre.
According to him, this is a reflection of the fact that the closure had blocked smuggling of petrol to neighbouring countries, and had shown that part of the nearly 60 million litres of petrol said to be consumed daily in Nigeria were smuggled to the neighbouring countries.
Group Managing Director of the NNPC, Mallam Mele Kyari, also disclosed that since the closure of the country’s borders, the volume of petrol evacuated from depots to filling stations across the country had dropped significantly since August 22, 2019.
A former Chief Operating Officer, Downstream of the NNPC, Mr. Henry Ikem-Obih, also speaking on the issue, revealed that prior to now, some of the country’s petroleum products were smuggled to Mali, Burkina Faso and even Cote d’Ivoire, blaming the development on the disparity in prices in the countries.
He said, “The reason for this is the differentials in pump price of PMS. PMS is the biggest challenge we have and the rest of the West African market.
“In some of those markets, as we speak, fuel pump price is about N400 per litre and the lowest, which is in Lome, is around N240 and N250.
“If you check the difference in pricing between Nigeria at N145 per litre and the rest of those markets, surely there are more incentives for a person looking for opportunities to engage in smuggling activities.
“No matter how many security agencies you line up at the border, or the communities that own the land at the border, you will have more cash from the smuggling to pay everybody else.”
Apart from the closure of the border, the Federal Government has introduced other measures to tackle the menace of fuel smuggling.
The government set up mechanism to commence the tracking of fuel imported, supplied and consumed in Nigeria while the NNPC entered into an agreement with the Nigeria Customs Service, NCS, and the Department of Petroleum Resources, DPR, to inaugurate a Joint Committee to tackle the growing incidents of petroleum products smuggling across the nation’s border towns.