Benin: rise in the price of smuggled gasoline, rush to service stations

Benin: rise in the price of smuggled gasoline, rush to service stations

2023-06-01 13:12:26

In Cotonou and surroundings, the price of smuggled gasoline, commonly called “kpayo” has been on the rise for two days. This increase follows the decision of the new Nigerian President Ahmed Bola Tinubu to remove fuel subsidies in his country.

It’s a rude awakening for most Beninese who use motor vehicles to get around. Since Tuesday, May 30, 2023, contraband gasoline, used by a large part of the population, has seen its price soar. While the liter of the precious liquid was trading at 500 francs in recent weeks, it suddenly rose to 650 francs in less than 24 hours. Two days later, at the time of writing, smuggled gasoline reached 800 francs a liter in some places and few vendors had it to serve users.

The brutality of this rise in fuel prices raises some questions about the origins of inflation. But as often, the reasons are not far to seek. Benefiting from its proximity to the neighboring Nigerian giant, Benin benefits from the low fuel prices in this country. If Nigeria is a major producer of crude oil, the country only refines a small quantity of the black gold drawn from the bowels of the earth. The State therefore exports the crude which it re-imports in its refined form in the stations which distribute it at a subsidized price.

Networks of traffickers will partly get their supplies from these service stations in order to flood Beninese towns with this cheap gasoline. Others will siphon the crude in the pipelines before refining it in an artisanal way. Problem, the new Nigerian president, Bola Tinubu, announced in his inauguration speech that he did not intend to renew these subsidies. The Nigerian Head of State believes that these subsidies weigh heavily on public finances and prevent necessary investments in social sectors such as health or education.

The announcement created a wave of panic and a domino effect. In Nigeria, hundreds of thousands of people rushed to service stations to anticipate the next increase in fuel prices. This is what leads to an increase in the price of contraband gasoline in Benin.

It must be said that the decision to remove fuel subsidies is not unprecedented in Nigeria. Introduced in the 1970s, these subsidies are not to everyone’s taste in the country. On the recommendations of the World Bank and the IMF, several former Nigerian governments have tried in vain to remove them. The fuel cut announcement also comes days after the inauguration of Nigerian billionaire Aliko Dangote’s oil refinery. The mega-factory should produce 650,000 barrels daily, enough to cover the country’s local needs.

Rush to gas stations in Benin

Hardly had the announcement of the abolition of fuel subsidies and even before the measure entered into force, that the price of smuggled gasoline rose in Benin. Since this Wednesday, May 31, there have been lines of motorcyclists and motorists rushing to service stations usually frequented by rare users.

The consequence is logical insofar as the price of fuel at the pump is now lower than that of contraband gasoline accessible on street corners. Indeed, gasoline is sold in service stations at the price of 650 CFA francs.

If users recognize the quality of the fuel served in service stations, they often have a reluctance vis-à-vis it. “The problem is that they don’t actually serve the amount charged,” laments a taxi-motorcycle driver met this Thursday, June 1, 2023. But with a difference of 150 francs on a liter of fuel, he says he has to go and get supplies from now on at the station.

Towards price inflation?

Long accustomed to profiting from cheap smuggled gasoline from Nigeria, Benin’s economy could be significantly affected by President Tinubu’s decision. Indeed, a surge in oil prices will lead to inflation in the market for goods and services. “The price increase will also, through ripple effects, cause inflation in other sectors of the Beninese economy,” analysis Florian Siaken, economist-statistician.

Furthermore, Benin’s economy is largely dependent on trade with Nigeria. A rise in fuel prices can lead to higher prices for products imported from Nigeria.

#Benin #rise #price #smuggled #gasoline #rush #service #stations


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Recent News

Editor's Pick