Oil marketers cry out over $2b debts

Oil marketers are set to send thousands of workers away – unless the Federal Government pays its debts. The debts are owed on importation of petroleum products, accrued interest on loans from banks and exchange rate differential. Major Oil Marketers Association of Nigeria (MOMAN), Independent Petroleum Marketers Association of Nigeria (IPMAN), Depot and Petroleum Products Marketers Association (DAPPMA) and Independent Petroleum Products Importers (IPPIs), in a joint communiqué yesterday after a meeting in Lagos, said many marketers and oil companies were owing workers at least eight months salaries because the Federal Government failed to pay the huge debts owed since 2015. The communique, signed by their legal adviser, Patrick Etim, states that: the hope that the debt will be paid in July, after Vice-President Yemi Osinbajo’s intervention appears to be dashed; banks are threatening to put tank farms under receivership; senior government officials and the leadership of the oil dealers have reconciled the figures and despite the government’s promise to pay, nothing has been done. “The condition of the contract being that the government shall pay the difference between the landing cost of the petrol and the selling price of petrol (as fixed by government) provided that the landing cost is higher than the selling price. “The government approved the landing cost, which fluctuated as it depended mainly on the international price of petrol and exchange rate of naira/dollar,” the marketers said, adding: “A key term of the government’s contract with marketers is that the under-recovery payments shall be paid to marketers within 45 days of submission of documents evidencing discharge of petrol cargo and trucking out from storage. “ It was also agreed that after 45 days, the government shall pay the interest charges on the loans taken by the marketers to finance the importation of cargoes of petrol.” The marketers said the problem of the banks is compounded by the fact that they provided billions of dollars to finance the importation of cargoes of petrol. The marketers said they opened Letters of Credit at approximate exchange rate of N197/$1 while petrol cargoes were supplied and sold at prices approved by the government and the repayment was calculated using the above exchange rate. The foreign exchange differentials, they said, arose as a result of the initial devaluation of the naira (by the last administration) from the initial N165/$1. The communique said: “The interest payable due to delayed reimbursement also by the the past administration, both of which the Federal Government had approved for payment to marketers, have not been fully settled by the appropriate Federal Government agencies. “It was only in the first quarter of 2017 that the banks were able to liquidate the Letters of Credit from 2014/ 2015 at the N360/$1 as against the N176- N195/$1 at the time the LCs were opened because of lack of foreign exchange from the government, leaving their accounts with the huge differential. “The recent further devaluation of the naira from N195 to N305 and later to over N365 to $1, while the Federal Government agencies based their reimbursement calculation on N197 to $1, left petroleum marketers within our association with additional debt burden in excess of N600bn. This is in addition to the over N250bn arrears owed. “The downstream sector as a whole, is now saddled with a debt burden of over N850bn, which keeps rising because the banks are still charging interest until the total debt is fully liquidated. “Commercial banks, the original and actual owners of these funds, are already hard hit by marketers’ inability to return these funds within the ‘contract tenure of 45 days’ and have, in line with the Central Bank of Nigeria’s prudential guidelines, the account of the marketers are now classified ‘non-performing’ accounts in all the banks. In addition, properties provided by marketers as securities for these funds are in the process of being auctioned. “We have indeed made several spirited efforts to get the government agencies involved to pay up fully, adhering to the principle of ‘full restitution’ to all participants in the then PMS import scheme but the major challenge on the economy has impeded complete success, hence we, once more, are making a direct appeal for the intervention of Mr. President.” The marketers went on: “The banks are worried that financing new petrol imports when outstanding loans, interests and charges have not been paid will be foolish especially when it is clear that the imports will represent an unmitigated loss to the importers based on the landing costs.” The oil marketers are unable to transact new business with banks because their accounts have been classified as non-performing. The effect of this is that the operations of the marketers have been halted. “There is a need for President Muhammadu Buhari’s government to keep improving governance, especially by correcting wrongs of previous governments and making government responsible to its contracts and responsibilities,” the marketers said. They urged the government not to allow its inactions in handling the critical issues facing banks, airlines, manufacturers, electricity companies and other businesses expose consumers to suffering. The marketers expressed their support for Federal Government’s plan to remove fuel subsidy and urged the government to deregulate the downstream sector of the oil and gas industry to save the economy from collapse. Thanks for reading.

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