Sahel fuel smuggling and terrorist taxation: How ECOWAS subsidy reform created a Jihadist revenue haven along the Niger–Nigeria border (Magaria–Jibia Axis)

Ayoki, Milton (2025): Sahel fuel smuggling and terrorist taxation: How ECOWAS subsidy reform created a Jihadist revenue haven along the Niger–Nigeria border (Magaria–Jibia Axis).

Abstract

After the ECOWAS-backed abolition of Nigeria’s premium-motor-spirit (PMS) subsidy in June 2023, the pump-price gap between Nigeria and Niger widened overnight from 0.23 to 0.71 USD litre⁻¹. Using a difference-in-differences design that exploits (i) 400+ border checkpoints (Clingendael 2022 GIS), (ii) 13 241 ACLED road-block events 2020-24, and (iii) monthly NBS price panels 2010-24, we show that jihadist taxation revenue on the Magaria–Jibia corridor increased by 0.9–1.4 USD million per month (≈ 18 % of IS-Sahel’s estimated budget). A structural gravity model calibrated to OECD-SWAC trade elasticities implies that a 0.10 USD litre⁻¹ price gap raises the probability of an Islamist checkpoint by 6.3% (SE 1.7, p<0.01) in PPML and 8.9 % (SE 2.4, p<0.01) in IV-2SLS, the latter implying an upper-bound revenue gain of USD 1.4 million per month. A partial-equilibrium counter-factual indicates that reinstating a targeted 0.30 USD litre⁻¹ “border-zone subsidy” would cost Abuja 54M USD yr⁻¹ but deprive insurgents of 11M USD yr⁻¹— a 5:1 cost-denial ratio. We provide the first quasi-experimental evidence that a commodity-price shock directly increases terrorist tax revenue, and show that a temporary border-zone subsidy can claw back 80 % of this income at one-fifth the cost of military surges.

• Item Type: MPRA Paper
• Language: English
• Keywords: Keywords: Fuel subsidy; smuggling; jihadist taxation; Sahel; border checkpoints; difference-in-differences; ECOWAS
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q34 - Natural Resources and Domestic and International Conflicts; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R41 - Transportation: Demand, Supply, and Congestion ; Travel Time ; Safety and Accidents ; Transportation Noise

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