Monday, September 27, 2021

NNPC’s Kyari says price differentials fuels Nigeria’s petrol smuggling

  • 80% products consumed in 13 neighbouring countries from Nigeria
  • But industry watchers advocate only in-country refining can lower costs
Mele Kyari, group managing director of the Nigerian National Petroleum Corporation (NNPC) recently explained that the prevailing huge price differentials in pump price of petrol in Nigeria and its neighbouring countries is the sole reason for the continued huge smuggling of the product from Nigeria across to its neighbours.
Kyari said the NNPC, in collaboration with some federal agencies, is set to combat the menace of smuggling of petroleum products, an effort he said has been largely hampered by existing arbitrage fuelled by smuggling.
The smuggling is further aided by Nigeria’s largely unmanned or poorly controlled borders on its over 3,000 km border stretch with 13 neighbouring countries through which petrol is smuggled into those countries.
Comparatively, Nigeria sells petrol at an average of N250 lower than what it sells in those countries. Currently, the product goes for N165 to N170 per litre. But the same volume comes at between N269.59 in Sierra Leone and N539.10 in Senegal.
According to data from globalpretrolprices.com, a litre of petrol in 2020 sold for N269.59 in Sierra Leone; Togo N295.64; Ghana N318.66; Liberia N321.43; Benin Republic N351.29; Guinea Conakry N354.18; Chad N360.34; Ivory Coast N417.37; Gabon N420.86; Burkina Faso N424.33; Cameroun N438.25; Mali N466.76; Niger Republic N464; and Senegal N539.10.
Additionally, about 80 percent of the total volume of petroleum products currently being consumed in the the West African region are smuggled illegally from Nigeria.
In a presentation at an interactive session by the joint Senate committee on the 2022 – 2024 medium term expenditure framework (MTEF) and fiscal strategy paper (FSP), Kyari said with a price difference of over N100 per litre between what is sold in Nigeria and in countries around the nation, it was difficult to cage the activities of petrol smugglers.
The NNPC chief executive said though the corporation, working in concert with other agencies, has made noticeable progress in combating the menace, the battle was yet to be won.
“As long as there is arbitrage between the price that you sell and what is obtainable elsewhere, you can be sure that it is very difficult to contain the situation,” he said.
He emphasized that the activities of smugglers have also made it difficult for Nigeria to determine the actual consumption figures for petrol, noting that the corporation can only know what was trucked out from loading depots across the country, but cannot determine how much of that was consumed in-country.
Recently, several figures have been bandied about as Nigeria’s daily or annual PMS consumption. In June this year, reports said smuggling across the borders increased the daily consumption of premium motor spirit (PMS) to 103 million litres per day in May.
But oil and gas industry watchers advocate that only a robust in-country refining of petroleum products can lower costs for Nigeria. According to them, continued heavy importation does not help the country in any guise.
On the MTEF assumptions, the GMD reiterated a base oil price scenario of $57 per barrel for 2022, $61 per barrel for 2023 and $62 per barrel for 2024 predicated on  a base national production of 1.883 million barrels per day in 2022, 2.234 million barrels per day in 2023 and 2.218 million barrels per day in 2024.
Kyari explained that the assumptions were arrived at after consultations with the ministry of finance and other relevant stakeholders while also undertaking a careful appraisal of the three-year historical dated Brent Oil price average of $59.07 per barrel premised on Platts Spot Prices among other considerations.
He said that price growth was to be moderated by the lingering concerns over COVID-19, increased energy efficiency as well as obvious switching due to increased utilization of gas and alternatives for electricity generation.

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