Unless the
Federal Government urgently offsets the accumulated subsidy arrears, interest
on loans and the foreign exchange differentials of N800 billion that accrued to
petroleum marketers between 2014 and 2017, the Nigerian banking system and the
downstream sector may face serious challenges.
The Ministry
of Finance is yet to pay the N800 billion for imported petrol, despite a
directive by the Acting President Yemi Osinbajo that the marketers should be
paid without delay.
The
marketers now import less than three per cent of the country’s demand, leaving
the Nigerian National Petroleum Corporation (NNPC) to take full responsibility
of importation of petroleum products into the country. They said, although, the
Federal Government has scrapped subsidy regime, interest on loan has continued
to accumulate from 2014 to 2017.
Already,
many of the petroleum marketers have embarked upon staff retrenchment after
stopping the importation of PMS thereby depending on supplies from NNPC.
The
marketers, comprising Major Oil Marketers of Nigeria (MOMAN), Independent
Petroleum Marketers Association of Nigeria (IPMAN), and Depot and Petroleum
Products Marketers Association (DAPPMA), said their inability to pay or service
the loans, has not only stalled the importation of fuel by the private
marketers but is also threatening the operations of the affected banks and the
country’s financial system.
Experts who
spoke with The Guardian yesterday said that the unpaid debt would lead to a
serious crisis in the banking sector, which they said was already burdened by a
series of bad debts, with the majority of these coming from the oil and gas
sector.
The group
said in a statement by its Legal Adviser, Patrick Etim, which was made
available to The Guardian yesterday that the debt had greatly impeded their
ability to operate. “Our operating funds have been eroded, the situation has
curtailed our ability to access funds from the financial institutions and some
of our members have resorted to staff retrenchment due to inactivity. Besides,
our worst fear is that AMCON at some point may take over our firms as a result
of this debt. It is for these reasons and other challenges facing the
downstream petroleum subsector that we seek government’s intervention to
approve the immediate payment of the debt,” they added.
To the
marketers, urgent intervention of the government and authorisation to pay the
outstanding debt will enable them to commence importation of petrol.
“Acting
President Osinbajo summoned a meeting on May 22, 2017 in which the Minister of
Finance, Minister of State for Petroleum Resources and the Central Bank
governor were in attendance. The meeting was on how to pay the debt.”
“Osinbajo,
at the end of the meeting, directed the Minister of Finance to within two weeks
resolve the problem of the outstanding debt to them, adding that the Minister
of State for Petroleum should confirm the indebtedness at the meeting. He said
government would do everything possible to clear the debt so the marketers can
commence the importation of petrol. As it stands now, only the Nigerian
National Petroleum Corporation (NNPC) currently imports petrol,” the marketers
said.
According to
them, the foreign exchange differentials, which arose as a result of the
initial devaluation of the naira by the last administration from the initial
N165/$1 and the interest payable due to delayed reimbursement by the
government, both of which the Federal Government had approved for payment to
marketers, have not been fully settled by the appropriate government agencies.
Efforts to
confirm Osinbajo’s directive for payment of the debt failed as press time.
The
marketers said: “The recent further devaluation of the naira from N195 to N285
and later to over N305 to $1, while the Federal Government agencies based their
reimbursement calculation on N197 to $1, has left members of our association
with additional debt burden in excess of N300 billion. The downstream subsector
is now saddled with a debt burden of over N400 billion, which keeps rising
because the banks are still charging interests on it until the total debt is
fully liquidated.
“As a result
of the unpaid interest and foreign exchange differentials, we are becoming
insolvent and financially handicapped to continue operating profitably.
Commercial banks, the original and actual owners of these funds are already
hard hit by our inability to return these funds within the ‘contract tenure of
45 days’ and have, in line with the Central Bank of Nigeria’s guidelines,
‘classified’ marketers’ accounts in all the banks in the country.”
According to
the statement, the marketers are unable to pay because the sums they owe the
banks form part of what they are in turn owed by the government and their
inability to pay or service the loans, has not only stalled their further
importation of fuel but is threatening the operation of the affected banks and
the nation’s financial industry at large.
“The problem
of the banks is compounded by the fact that they provided billions of dollars
to finance the importation of cargoes of petrol. They opened Letters of Credit
at approximated exchange rate of N197/$1.00. Petrol was supplied and sold by
marketers at the then prevailing government-approved pump price and the
repayment was calculated using the above exchange rate. “As at 2016, the banks
have not liquidated the Letters of Credit from 2014 because of lack of foreign
exchange from the government.”
Executive
Secretary of the Major Oil Marketer’ Association of Nigeria (MOMAN), Obafemi
Thomas Olawore, said that only a few marketers were importing an insignificant
quantity of petroleum products into the country.
According to
him, there is still subsidy. “At least the Federal Government bears over N300
million daily as subsidy as NNPC becomes the sole importer of petroleum
products.”
On the
implication of marketers’ indebtedness to the banking sector and the economy in
general, Professor of Banking and Finance, Mountain Top University, Ojo Joshua,
said the delay in the repayment of the debt might lead to retrenchment in the
banking and the oil and gas sectors.
He noted
that the situation on ground showed that the government might not be able to
pay the debt due to the present economy recession. According to him, unless
urgent measure is taken to offset the debt, it may translate to a
non-performing loan.
The Director-General,
Lagos Chamber of Commerce and Industry, Muda Yusuf, attributed the high
non-performing loans in the banking sector to the oil and gas indebtedness to
the banks.
“This can
have negative effects on the financial sector stability, which is not good for
the economy. A situation, where a banking sector is being owned N800 billion is
a major threat to the continuous existence of the sector.”
Yusuf also
called for a complete liberation of the sector. We cannot continue to run the
sector like this. This is why we have not been able to unlock the huge
potential in the downstream area. The marketers need to be settled and urgently
too.”
The Chairman
of DAPPMA, Dapo Abiodun, said in addition to paying the marketers’ outstanding
$2 billion claims, the permanent solution was to remove the cap on the pump
price of petrol and fully liberalise the downstream sector.
Abiodun, who
is also the Chief Executive Officer of Heyden Petroleum Limited, said it was
not by choice that the marketers allowed NNPC to currently import 95 per cent
of products.
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