SCARCITY HITS NEIGHBOURING COUNTRIES - BusinessDay

Wednesday, 11 January 2012 00:00 BILL OKONEDO & DANIEL OBI

The Republic of Benin, which shares land borders with Nigeria is witnessing a biting scarcity of petrol, days after Nigeria stopped subsidising the product. This gives credence to widespread claims that some unscrupulous Nigerian businessmen had for years been smuggling petrol meant for local consumption across the country’s borders for extra profit, even after claiming subsidy on the product from the Federal Government.

What this indicates is that the Nigerian government has inadvertently been subsidising fuel to neighbouring countries and enriching some unscrupulous local businessmen. But in the last eight days, those illicit activities have been brought under control.

Said a Nigerian who does business in Benin Republic: “Now, with the upward price adjustment in Lagos, it is no longer profitable to smuggle fuel from Lagos to Benin Republic and Benin Republic will now have to spend its own foreign exchange to import what citizens consume.”

Sanusi Lamido Sanusi, governor of the Central Bank of Nigeria had said in a television programme yesterday :The cost of petrol in Nigeria was N65 per litre and in neighbouring countries it was N190 per litre.

“In such a situation, everybody who knows he can take advantage will take advantage. In some countries, smuggling across borders attracted the death penalty and then it was changed to 20 years.

But here, you cannot do what a monarchy or totalitarian government will do. But you can deal with it through the cost. When the cost differential becomes insignificant, it becomes unprofitable to smuggle and that blocks the leakage”.

Speaking on the same programme, Ngozi Okonjo-Iweala, finance minister said:” The element of smuggling was because the cost here was lower than neighbouring countries. At night tankers are driving across our borders and taking our products away from our people”.

A Nigerian businessman said the neighbouring countries have been consuming Nigeria’s petrol and “we have been squandering our foreign exchange bringing in petrol, spending N1.3 trillion, only for the petrol to be smuggled across the border”, he regretted.

“There is this thing about the subsidy. Apart from it being consumed by the rich and Nigerians, all our neighbouring countries also consume our petrol. In some states near borders, petrol stations are built in the bush, some within miles of the border. They never sell fuel there. They just take their allocation of petrol and take it across the border and sell it at world market price”.

Other analysts believe that the introduction of fuel subsidy by the federal government will moderate fuel consumption and specify the actual quantity of the product consumed by Nigerians yearly.

The Lagos State Commissioner for Economic Planning and Budget, Ben Akabueze, while addressing newsmen on the state’s N491.941 billion budget analysis, said consumption of fuel will now be reduced, compared to what was consumed in previous years.

“What we will see is that consumption will reduce because many will be forced to park their cars and take public buses. All of the petrol that was brought into this country for local consumption and had subsidy claimed on them, which later found their way out of the country, will no longer happen.

“The consumption will decrease and correspond to the amount of subsidy. What is true, however, is that because there is no more subsidy, the amount often deducted for subsidy from the federation account will now be available for the three tiers of governments. So we expect the impact of the subsidy to be positive, if properly applied.”

It is also expected that the policy will benefit the economy and the citizens, in the medium to long term as the private sector would likely invest in the downstream oil sector with a corresponding impact on the creation of jobs.

Other benefits that would be derivable from the policy, according to analysts include reduction in the pressures on foreign reserves as huge chunk of foreign reserves was used to fund fuel importation.