Petrol smugglers made N17m per truck under subsidy regime – Kyari

• Mele Kyari said petrol smugglers made as much as N17 million per truck under the subsidy regime
• Since the removal of the subsidy, fuel prices have continued to soar
• Analysts predicted the hikes in fuel prices as part of economic activities that will define the remaining quarters of the year

The Group Chief Executive Officer (GCEO) of the Nigerian National Petroleum Corporation Limited (NNPCL), Mele Kyari, said petrol smugglers made around N17 million from each petroleum truck supplied to neighbouring countries under the subsidy regime.

Kyari stated this on Monday, October 14, while addressing the media in Abuja about the government’s efforts to deregulate the oil and gas sector.

He said with fuel subsidy, cross-border smuggling of the product was rife as smugglers made up to N17 million on a 6,000 litre truck per trip, which would, in contrast, have generated N500,000 if sold within Nigeria.

The NNPCL boss, however, noted that with the removal of fuel subsidy, the country no longer loses such revenue to smuggling as fuel prices now reflect true market value.

“In the last 47 years, PMS has always been subsidised and subsidy is creating arbitrage; that means there is a difference between prices in one location, lower than what it should be in another location.  

“And when Mr President announced subsidy (removal) in May, what he did was to recalibrate the price. There is no longer any value in anyone taking the product across the border. If you do, you are not going to make the profits that you do.  

“In a 6,000-litre truck, you can actually gain up to N17 million from just one truck. How are you going to stop someone who, with two trips, can just easily make N17 million times two, which is the price of the truck itself?

“However, when you take a truck legally, maybe N8 million, say, to Maiduguri, the legitimate value you have is less than N500,000. Why will I see N17 million and then take all the trouble go to Maiduguri, keep it in the fuel station for one month and then make N3 to N4 million? So you see, as long as you are not in a subsidy regime, you won’t lose money,” Kyari said.

Fuel prices have been soaring since the subsidy removal

Following the announcement by President Bola Tinubu of the removal of the fuel subsidy during his inauguration on May 29, 2023, the price of fuel has been soaring.

The subsidy removal has resulted in the fluctuation of the price and availability of the product in the market, with the price increasing from an average price of N238.11 as of May 29, 2023, to between N800 and N1,000 per litre in filling stations and over N1,000 at the black market.

In addition to the price hike, the product has become scarce, resulting in long queues in petrol stations in major cities across the country.

Also, the NNPCL recently announced a raise in the price of petrol for the second time in two months, with prices now approximately N998 in Lagos from N885 and N1,030 in Abuja from N897.

The hike may not be unconnected to reports that NNPCL intends to withdraw as an intermediary in the Dangote Refinery purchase deal. This has also raised concerns about likely future price increases.

Experts predicted hike in petrol price  in Q3 2024

Recall that TheRadar had reported that a hike in the price of fuel in the third quarter (Q3) of 2024 will be one of the key economic occurrences that will define the quarter.

The analysts and economists noted that Nigeria’s oil and gas sector will witness significant challenges in the coming months, which will cause a hike in the price of fuel in Q3 2024 by up to 300 per cent year-on-year in some states.

According to a 2024 Third Quarter Outlook for Nigeria’s Energy Sector (July and September 2024) report by the Society of Energy Editors (SEE), the projection is premised on Nigeria’s continued reliance on fuel imports, underperforming domestic refineries, delays in the full operationalisation of new refineries, increasing domestic demand for fuel, the strain on government finances due to payment of petroleum subsidies and continued depreciation of the naira.

The report stated, “The sector is expected to experience growth and development but also faces significant challenges that need to be addressed to ensure sustainable progress.

“Ongoing efforts to revamp existing fields to boost output; management of the 2024 marginal fields bid round by the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) to impact investors’ confidence.

“Security issues in the Niger Delta, ongoing divestments by oil majors, lack of investments and decaying infrastructure remain major concerns.

“Fuel imports will remain high, putting pressure on foreign exchange reserves; petroleum subsidy to remain a significant burden on government finances.

“With fuel sold at different prices across the country in line with subsidy removal, price hike could hit 300 per cent in some states compared to the same time in 2023.”

Improved petrol supply: NNPCL seeks private companies to operate Warri, Kaduna refineries

Meanwhile, TheRadar reported that the Nigerian National Petroleum Company Limited (NNPCL) wants to engage private companies that will oversee the operation and maintenance of its Warri and Kaduna refineries.

In a circular released through its official X account, NNPCL said the decision is to ensure reliability, sustainability and improved supply of petrol and enhance energy security, adding that the tender process of selecting the companies is in three stages: expression of interest (EOI), technical evaluation and commercial evaluation.