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

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.

Methodology:

Using a difference-in-differences design that exploits (i) 400+ border checkpoints (Clingendael 2022 GIS), (ii) 13,241 ACLED road-block events 2020–2024, and (iii) monthly NBS price panels 2010–2024, 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).

Structural gravity model results:

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.

Counterfactual analysis:

A partial-equilibrium counterfactual indicates that reinstating a targeted 0.30 USD litre⁻¹ “border-zone subsidy” would cost Abuja USD 54 million yr⁻¹ but deprive insurgents of USD 11 million yr⁻¹—a 5:1 cost-denial ratio.

Conclusion:

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.