Nigeria's oil sector is grappling with a persistent problem - the smuggling of petroleum products, intended for domestic use, outside the country. Despite the removal of fuel subsidies, authorities have revealed that the illegal activity remains profitable due to a significant price differential between Nigeria and its neighboring countries.

According to the Nigeria Customs Service, the Comptroller General, Adewale Adeniyi, the relatively cheaper pump price in Nigeria encourages the illicit export of Premium Motor Spirit (PMS) to countries like the Benin Republic, Cameroon, and Niger. Adeniyi highlighted the issue during the service's first quarter performance review in Abuja, stating that "despite the removal of the fuel subsidy, it is still profitable for smugglers to take fuel illegally from Nigeria."

The price disparity between Nigeria and its neighboring countries is substantial. While PMS costs between N880 and N950 per liter in Nigeria, it is sold for significantly more in neighboring nations - around N1600 and N2000 per liter in Cameroon, Niger, and the Benin Republic. Even though local costs of gasoline have decreased in some of these countries, the Customs chief emphasized that smuggling operations are still fueled by this large price differential.

The Nigeria Customs Service has launched the "Whirlwind" initiative to combat the issue. Adeniyi explained that "this arbitrage provides the incentive" for smugglers, and the initiative aims to address the problem. The service's efforts come as the country struggles to stabilize its fuel prices, which have fluctuated significantly over the past year. In May 2023, fuel sold for ₦238.11 per liter, increasing to approximately ₦770 per liter in May 2024, and currently averaging around ₦900 per liter.

The fuel smuggling crisis has significant implications for Nigeria's economy and energy sector. The illegal export of PMS not only deprives the country of much-needed revenue but also undermines efforts to stabilize fuel prices and ensure energy security. The government's removal of fuel subsidies was intended to encourage private investment in the sector, but the persistence of smuggling activities threatens to undermine these efforts.

As Nigeria struggles to address the fuel smuggling crisis, the country's energy sector remains vulnerable to external factors, including global market fluctuations and regional instability. The authorities' efforts to combat smuggling will need to be sustained and coordinated to ensure that the country can realize its energy potential and provide affordable fuel to its citizens.

In the broader context, the fuel smuggling crisis in Nigeria highlights the need for regional cooperation and coordination to address energy security challenges. As the country works to address its internal issues, it will also need to engage with its neighbors to develop a more integrated and secure energy market.