An energy policy expert, Samuel Caulcrick, has cautioned that any move by the Federal Government to reintroduce petroleum subsidies through crude supply to local refineries could trigger a resurgence of cross-border fuel smuggling and undermine recent gains from deregulation.
Speaking in Lagos, Caulcrick said such interventions, though aimed at easing domestic fuel costs, could end up benefiting neighbouring countries due to price differentials that historically drive illicit trade.
He explained that smuggling is essentially a form of market arbitrage, where traders exploit pricing gaps across borders. According to him, Nigeria’s long-standing struggle with fuel smuggling had been partly addressed by subsidy removal and the shift to market-based pricing, which reduced profit margins for smugglers and acted as a deterrent.
However, he acknowledged that the removal of subsidies has significantly increased the cost of living, raising concerns over affordability and economic hardship for many Nigerians.
“I’d rather not support subsidising oil input to our local refineries for reasons of unintended subsidising our neighbours,” he said, warning that such policies could also open opportunities for foreign operators, including airlines, to take advantage of lower-priced fuel.
To address the challenge, Caulcrick proposed a targeted digital subsidy system that would deliver support directly to consumers without distorting market prices. He explained that such a system would rely on non-transferable digital credits tied to verified identities, ensuring that only eligible Nigerians benefit.
Under this model, he said, the risk of cross-border exploitation would be significantly reduced, as the credits could not be traded or used outside the country. However, he noted that successful implementation would require robust infrastructure, including a reliable national identity system such as the National Identification Number (NIN), as well as strong technological safeguards to prevent fraud and duplication.
He also warned that poorly designed digital subsidy frameworks could create unintended consequences, including the emergence of black markets.
Beyond subsidy reform, the expert called for complementary measures to curb smuggling, including strengthened border surveillance using advanced technologies such as drones and scanners, particularly by the Nigeria Customs Service. He also advocated a review of tariff regimes that may inadvertently encourage illicit trade.
Caulcrick maintained that balancing fuel affordability with border security remains a critical policy challenge, stressing that reforms must be carefully designed to avoid reversing progress made in Nigeria’s energy market.
