-By Eddy Ochigbo
On August 22, 2019, worried by the increasing age long illegal business of food and fuel products smuggling from Nigeria to neighboring countries, the Federal Government issued a directive to the Nigerian Customs Service (NCS) to shut all the nation’s land borders as a way of combating smuggling of contraband goods into and out of the country.
A data released then by the National Bureau of Statistics (NBS) showed that importation of petroleum or Premium Motor Spirit (locally referred to as petrol) declined by 11% to 1.46 billion litres one month after, in September 2019 from 1.64 billion litres in August, while diesel fell by 15% to 323 million litres in September, from 378 million litres in August. The decline in the importation of the petroleum products was largely believed to be due to the partial border closure.
The activities of cross-border petroleum products smugglers had caused much hardship for Nigerians and robbed the nation of huge sums of money and had been subverting government’s efforts to ensure adequate supply of petroleum products in all parts of the country.
Available records show that there has been an upsurge in incidents of petroleum products smuggling across Nigeria’s borders, which is incentivized by high rate of arbitrage, especially considering the high price of petrol in Nigeria’s neighbouring countries. Because of the obvious differential in petrol price between Nigeria and other neighboring countries, it had become lucrative for smugglers to use frontier stations as a veritable conduit for the smuggling of products across the border.
This had resulted in a thriving market for Nigerian petrol in all the neighouring countries of Niger Republic, Benin Republic, Cameroun, Chad and Togo and even Ghana which has no direct borders with Nigeria.
According to Nigerian National Petroleum Corporation (NNPC), smugglers of PMS divert about 10 million litres of the commodity on a daily basis and sell to neighbouring countries. NNPC also stated that the smuggling of the product was costing the nation about N2 billion daily. The price differential between the price of PMS in Nigeria and its neighbouring countries, coupled with poor monitoring mechanism of the movement of petroleum products from depots to filling stations, encourages and provides incentives for the smuggling of the product.
In December last year, at a press parley with Energy Correspondent, the Group Managing Director of NNPC, Mele Kyari disclosed that the then N145 per litre fuel price regime in Nigeria runs against the N350 per litre in many other West African countries. For example In Ghana today 1USD is equivalent to 5.6 Cedis. A litre of PMS is sold as at March 2021 at the rate of 90 cent which translates into about 400 Naira in Nigeria as against the pump price of 162 Naira per litre sold in Nigeria during the same period.
The partial border closure directives have to be reversed recently by the government, due to pressure by the people as a result of an increase in poverty index in the country, which was made worse by the novel coronavirus induced lockdown. The government was left with no other option than to open the borders in order to make life easier for the people.
While some economic experts hailed the partial closure of the nation’s borders which they referred to as a short term measure to curtail the smuggling of petroleum products from Nigeria to the neighbouring countries for higher monetary gain, discerning Nigerians insist that the government must look for long term solutions that will address the ugly trend holistically.
PEF finds long term solution
Disturbed by the huge economic impact of the petroleum products smuggling and its negative effect on the nation’s purse, the Petroleum Equalisation (Management) Board Fund {PEF(M)B} in collaboration with the National Information Technology Development Agency (NITDA), has developed a long term solution to the problem by deploying what it called the ‘Downstream Automated Fuel Management Information System’ (DAFMIS), a technology that will checkmate the activities of petroleum products smugglers, and enhance the operational processes within the government agency; a move deemed quite innovative and that which will be beneficial for all stakeholders in the industry. According to PEF’s General Manager Corporate Services, Dr Goddy Nnadi, this solution became necessary to check incessant smuggling of petroleum products across the country’s land borders. “Over the years there’s been a great concern on how petroleum products that are meant for local consumption, are smuggled to neighbouring countries thereby creating scarcity in the country. This and other pressing needs are the reasons why PEF(M)B embarked on finding lasting solutions to arrest this ugly trend.
“With DAFMIS, every movement of petroleum products will be digitally monitored real time across the country”, Dr Nnadi said, pointing out that the era of product smuggling will soon be over.
DAFMIS as the solution
One unique feature of the ‘Downstream Automated Fuel Management Information System’ (DAFMIS), is its distinct Fuel Monitoring System (FMS). This provides for an electronic eye (sensor network) which spawns near real time information on ships, tank farms, Depots, pipelines, trucks and filling stations. This is an ingenious idea which guarantees that the movement of products are tracked everywhere and on the go.
DAFMIS is structured to cut waste, improve efficiency and plug loopholes in the petrol distribution chain. Other features of this inventive solution include: Business Improvement to upgrade the work processes between departments as well as on-field operations for overall efficiency of the Board, Business Applications: this is designed to manage Marketers’ registration claims and reconciliations, much more accurately.
More than 550 trucks are currently being retrofitted for the scheme. It does not end there. Fuel in the storage tanks of filling stations can also be monitored remotely, country wide. In effect, any person or station hoarding fuel for whatever reason would be caught and sanctioned.
DAFMIS as a technology, will thrive through a state of the art internationally established infrastructure for real time and first class service delivery. The Operations Command and Control Center (OCCC) has since been installed within the confines of PEF(M)B’s Headquarters in Abuja. According to the Deputy Manager, Operations of PEF(M)B, Alhaji Aminu Ahmed who spoke to Valuechain in an interview, the Infrastructure and everything that has to do with technology in PEF(M)B, has been installed, upgraded and are now test-running round the clock. The OCCC can be likened to the Johns Hopkins University Research Center which gives per minute updates on the COVID-19 pandemic.
Capacity to check smuggling
The OCCC has the capacity to check smuggling of products across our borders as it facilitates real time monitoring in terms of whether or not the products are being moved according to specified and approved routes. If for any reason there is a diversion from the approved routes, a red flag will be triggered indicating an abnormality and the right institution that needs to know and be aware of the occurrence would automatically be notified, because all the institutions concerned are represented at the center. For instance, if the abnormality has to do with the Department of Petroleum Resources (DPR), it would automatically show on their individual screen or if it’s a national security issue, it would also automatically be seen on their own screen. The open access in technology that the project ensures, enhances and promotes was sealed and validated by NITDA when its management visited the center recently.
According to Ahmed, the OCCC gives end-to-end information on what is, not what was. The technology will avail useful data to different government agencies which is currently in short supply for effective service delivery and improvement of surveillance in terms of national security. He went on to state that “at any time, if there is going to be a shortage it would be known, and PEF(M)B is in the position to provide this information. This is very important for national security and for quality control. Over the last few years there was so much negativity due to lack of verifiable information. Since PEF(M)B accounts for receipts, it must be present from source point to capture what is coming in or what somebody is refining. We have to know what goes into storage, so that we can track what comes in and out of the refineries or out of the jetties; what you have in storage in the tanks; and we have record of what you have in the trucks. So it’s as simple as that; to guarantee seamless visibility, just like a bank account, you know when you are credited or debited. By monitoring all the activities, you know where you stand. So if you have that visibility it also helps you in monitoring products that crosses our borders so that you can alert Customs service or task force to swing into action”.
He added that “it will also provide the opportunity to conduct route analysis for transportation of products in order to avoid bad roads. Also with transparency, insurance companies can determine volatile areas and what the premium is. It’s all about energy information advisory. For every form of energy, the data is available. And the private sector and national security, use such data for planning. The infrastructure we have now owes much to PEF(M)B’s determination to get things done clinically and transparently”.
Operations Command and Control Center at a glance
The centre functions in such a way that once there is fire disaster, it is dictated and the closest Fire Service would be alerted. Then the DPR would also see the trigger on its screen as well. The OCCC is domiciled at PEF(M)B and monitors, analyzes and evaluates the distribution and movement of petroleum products. The center has representatives of all the stakeholders in the oil and gas sector and the main objective is to ensure the availability, transparency and sustainability of the process of the products’ seamless distribution throughout the country.
Penalty for breaking rules and regulations of products distribution
It depends on the nature of their violations. Is the violation DPR related, or national security, or the other stakeholders? It depends on the Department that gets the alert of the violation or violations. Given the fact that the centre operates round the clock, monitoring, analysing, observing the entire process, statistics are continually being churned out to augment planning and execution in the entire value chain. The center also analyzes the nature of the roads, lifespan of the trucks, since the pipelines are down and the rails are yet to commence transportation of products. It looks at the frequency of trucks in conveying products. So that operators and stakeholders can get informed analysis based on the data.
It should be stressed that DAFMIS runs through every gamut of the organisation, and is in line with global best practices and management systems. The socio-economic benefits of DAFMIS are multifarious. One of these comprises the provision of real time data, germane to making critical and on-time decisions in the downstream sub-sector of the petroleum industry. It is coupled to curb wastes and to also act as a check against nefarious activities within the system. It provides a veritable board for the nation’s economic planners and lends itself to the maintenance of energy security.
Other benefits include traffic advisory and road maintenance, job generation, provision of downstream data on the go, promotion of local content and generally making for a huge transformation of the downstream activities within the oil industry.
Valuechain learnt that stakeholders are anxiously expecting the take off of the project as it will assist them in monitoring the transportation of their products to avoid shortages through pilferage.