As the debate over fuel subsidy deepens in the run up to the 2027 Presidential election, one of Nigeria’s notable policy research groups, the Independent Media and Policy Initiative (IMPI) has said that the campaign promise of the Presidential candidate of the African Democratic Congress (ADC),Atiku Abubakar to restore fuel subsidy would cost the country a daily revenue loss of at least N12 billion.
In a policy statement signed by its Chairman, Dr. Omoniyi Akinsiju, IMPI noted that the revenue loss from the Atiku model of production subsidy would have grave implications for the national economy.
According to the policy group, its research centred on the loss that would accrue from cross-border smuggling only.
“To determine the exact monetary value Nigeria would lose daily to cross-border smuggling under former Vice President Atiku’s proposed “production-side crude discount/subsidy” model, we must model the smuggling volume against the international price arbitrage gap.
“The Base Domestic Consumption (Deregulated Reality) equals 45 million litres per day (283,000 barrels per day). Because of underprice/capped or subsidized regimes such as pre-2023 or under Atiku’s target model, artificial demand surges back to 60 to 65 million litres per day due to illicit cross-border arbitrage into neighbouring Benin, Togo, Niger, and Cameroon. Daily smuggled volume will reach 15 to 20 million litres per day, or about 94,000 to 126,000 barrels per day.
“Assuming Atiku’s crude discount model aims to push domestic pump prices down to a subsidized target of, for instance, ₦500/litre when the true international landed cost is ₦1,100/litre, the implicit state subsidy equates to ₦600/ litre, i.e. $0.42 per litre at ₦1,400/$. Daily physical loss would equal the smuggled volume of about 20,000,000 litres per day (approximately 126,000 barrels per day).
“Direct fiscal subsidy loss in Naira and US Dollars would equal 20,000,000 litres smuggled a day multiplied by a ₦600 discount per litre, which will equal ₦12 billion a day. Converted to US Dollars at an exchange rate of ₦1,400/$,it would mean a daily loss (USD) of ₦12,000,000,000 divided by 1,400, which will equal eight million, five hundred and seventy-one thousand, four hundred and twenty-eight dollars ($8,571,428) a day. This amounts to N4.38 trillion in Naira terms annually and $ 3.12 billion in dollar terms, respectively.”
The think tank also painted a stark picture of the implication of a daily loss of N12 billion to the national economy.
“The ₦12 billion lost daily is not merely “cheap fuel” for Nigerians; it represents direct revenue foregone from the state’s equity crude sales. That capital is diverted from the Federation Account Allocation Committee (FAAC) pool and effectively subsidises neighbouring economies.
“As smugglers divert subsidised products to capture higher profit margins in neighbouring markets, it causes artificial local supply shortages, stock-outs at filling stations, and prolonged vehicle queues across border states.
“Supplying an additional 20 million litres per day to feed cross-border smuggling consumes an extra 126,000 barrels of crude feedstock daily; this represents nearly 15% of Nigeria’s total state equity crude accrual spent on servicing regional arbitrage rather than national development.
“In addition, offering crude oil below global spot prices incentivizes illicit trading practices, including unrefined crude exports or product smuggling across land borders to capture lucrative international price differentials,” it added.
