Featured, Oil & Gas
As banks continue to seize their asserts, there is fear of possible job loss and fuel scarcity as federal government reneges on its promise to pay marketers’ fuel subsidy
By Emeka Ejere
Massive job loss and fuel scarcity may be looming as intensified collateral takeover spree in the downstream sub-sector of the oil and gas industry last week has led to the confiscation of multibillion naira worth of assets, including 79 filling stations and nine tank farms from oil marketers.
The oil marketers under the aegis of Major Oil Marketers Association of Nigeria, MOMAN, and Depot and Petroleum Products Marketers Association, DAPPMA, who confirmed the assets’ takeover on Sunday, November 18, maintained that this was caused by delay in payment of over N800 billion in fuel subsidy debts and taxes, which the federal government owe the marketers.
Babafemi Adewole, the executive secretary of the DAPPMAN at a recent joint interactive session held by the DAPPMAN and MOMAN in Lagos, disclosed that “sixty percent of marketers have been forced out of business as banks have taken over their depots, assets and properties due to their inability to pay back monies borrowed to import fuel.” He spoke with Clement Isong, his MOMAN counterpart.
However, a bigger problem to this is the likelihood of a total shutdown of the DAPPMA’s 1.3 billion metric tonnes capacity facilities across Lagos State, in solidarity with others whose assets are being confiscated.
The National Assembly and the Federal Executive Council, FEC, had announced approval of payment for marketers, but the MOMAN and DAPPMAN said that the payment was yet to be made while its announcement and inaction of agencies saddled with payment have worsened their relationship with banks.
According to the NOMAN and MOMAN, the processes highlighted for payment by government were inimical to the operations of their businesses. “The processes they have highlighted are killing our businesses. Immediately the banks read in the media that the National Assembly had approved, they went to court, got injunction and seized our assets,” Adewole said.
The MOMAN is a downstream oil and gas group made up of six major marketers, including Mobil, Conoil, OVH Energy, Forte Oil, MRS Oil and Total Nigeria Plc.
The DAPPMAN scribe said although the federal government had earmarked money to clear the debts, the marketers were yet to be paid.
Adewole said: “The debt has had very adverse effects on our operations. I am aware of depots that have been forcibly taken over by banks because they got injunctions from the courts.
They did so the moment they heard that the National Assembly approved payment of the debt to marketers. Unfortunately, as at today, the money is yet to get into our accounts.”
He said the other challenge is that many of the marketers have laid off more than 90 percent of their staff because of financial constraints. Adewole, however, said that the government had promised that part of the money would come as promissory note and cash. “It means you have to go back and discount this promissory note in the bank. This means we are losing because the money has been delayed and this adds to the interest to be charged on our accounts,” he said.
On his part, Isong appealed to government agencies saddled with the payment to expedite action to save marketers from closing shop as interest on loans keeps increasing.
Oil marketers in Nigeria had raised the alarm over N650 billion owed them by the federal government in subsidy arrears, saying the settlement of the debts owed them would save their assets from being taken over by banks.
According to information available to Realnews, government is currently indebted to members of the MOMAN, DAPPMAN, Independent Petroleum Marketers Association of Nigeria, IPMAN, and Independent Petroleum Products Importers, IPPIs.
Available figures indicate that the major marketers in the MOMAN are owed N130.7 billion, and the non-payment of these subsidy arrears, according to the marketers, has resulted in huge financial challenge in the downstream sub-sector, coupled with its inability to attract more funds as the banks are yet to get back what they lent.
According to Andrew Gbodume, the chairman of MOMAN, due to the fast eroding goodwill of the sector and inaction of government to effect payment of subsidy arrears, most downstream players are currently experiencing contraction of operations occasioned by reduced capacity.
In March this year, the federal government requested the appropriation of N650 billion from the National Assembly to clear the backlog of subsidy arrears owed marketers. The request came after a 14-day ultimatum issued to the government by the DAPPMAN to commence staff disengagement over the N650 billion debt owed it.
This prompted government to facilitate series of engagements and meetings among the Nigerian National Petroleum Corporation, the Ministry of Labour, the Presidency and the DAPPMAN/MOMAN to find a common ground that could avert another phase of petroleum products scarcity across the country.
After a wide consultation, the government showed commitment to paying the debts, which eventually calmed the situation and returned normalcy in the product supply chain.
Subsequently, in July this year, the Senate approved the payment of N348 billion as outstanding subsidy claims to 74 petroleum marketers which included Oando, Total, Honey Well, Capital Oil, Conoil, A.A. Rano, Folawiyo, Eternal oil, Aiteo, Forte Oil, Bovas, Mobil (11 Plc), MRS Oil and Gas, among others.
The Senate said the payment was to enable them update all outstanding liabilities and clear all debts, interest accrued and foreign exchange differential once and for all.
The approval was sequel to the adoption of the interim report of the Committee on Petroleum Downstream on the promissory note programme and a bond issuance to settle inherited local debts and contractual obligations to petroleum marketers.
Findings show that the process of payment is presently stalled as the Debt Management Office, is yet to finalise the process that would lead to the release of the fund.
A source said that the government made a promise for issuance of promissory notes to offset inherited local debts, but that had not been effected.
Kabiru Marafa, the chairman, Senate Committee on Petroleum Downstream, had advised that continuous delay of the approval of the promissory note request will affect the liquidity of the oil companies and undermine their crucial role in the development of the economy.
In the report, the committee recommended that the 55 oil marketers be paid 100 percent of their claims. From the said amount, 55 oil marketers are to receive N276 billion (N275,750,415,108) while 19 others will get N73 billion (N73,452,639,866).
The committee also called for the payment of 65 percent claims to some marketers due to contentions in their figures. The committee was of the opinion that interim payments should be effected to the marketers pending full verification of their claims.
Following the hike in the price of crude oil in the international market, the federal government’s subsidy on fuel rose to N2.4 billion daily in May, from N774 million in March 2018.
Unlike in March when the price of crude oil hovered around $66 per barrel, it hovered between $75 and $80 per barrel since May, thereby pushing up landing cost of the refined product in the domestic markets for finished product importers like Nigeria.
According to a report released in June by the Petroleum Products Pricing Regulatory Agency, PPPRA, without the government subsidy, the price of petrol could have been as high as N205 per litre in the domestic market. The PPPRA stated: “The price of the commodity appreciated by 8.47 percent from N189 per litre recorded in April 25, 2018 to N205 per litre as at May 16, 2018.”
The PPPRA report disclosed that during the week under reference, between May 11 and May 16, 2018, oil prices continued to soar, stating that the average price for Brent Dated was $77.92 per barrel; Nigeria’s Bonny Light was $78.08 while West Texas Intermediate, WTI, was $60.27 per barrel.
Price of petrol is still fixed at a maximum of N145 per litre, meaning that the NNPC is currently paying N60 as under recovery for a litre of the commodity.
Tags: Fuel Scarcity Subsidy crisis: Why confiscation of oil marketers’ assets may trigger job loss
