A $2b debt on the neck of oil marketers is causing jitters among oil workers and their bankers. Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), 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) want the Federal Government to save the day, writes EMEKA UGWUANYI
PETROLEUM marketers are threatening to unleash a major massive sack in the oil industry.
Issuing the threat are 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).
Behind this threat is he over $2 billion debt hanging on marketers as a result of the Federal Government’s failure to pay for imported oil products.
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and others are also feeling the effect of the sad situation.
PENGASSAN, in a recent statement, urged the Federal Government to settle all debts owed oil marketers to help the growth of the oil and gas industry and develop the economy.
The union is worried by the threat of marketers to embark on massive retrenchment of their employees.
National Public Relations Officer Fortune Obi said the debts were the outstanding subsidy owed on the importation of petroleum products, accrued interest on loans from banks and exchange rate differential.
The union said the debts resulted in halt in the importation of refined petroleum products leaving only the Nigerian National Petroleum Corporation (NNPC) doing the business.
PENGASSAN said: “The government should try as much as possible to verify the authenticity of the claims by the oil marketers and ensure quick settlement of the genuine debts.
“The government should try to separate the genuine claims by the importers from spurious ones and pay them because we will not like to be engulfed in the mistakes of the past where briefcase marketers milked the nation through dubious subsidy claims.
“A situation where the workers in the industry bear the inability of the government to honour its obligations as part of the importation deal will be unfair and unacceptable to our Association. This is against the President Muhammadu Buhari’s administration major policy of job creation.
“As a responsible trade union, as much as we will support any move by the government to end subsidy regime and spurious claims by the marketers, we are also canvassing for the payment of debts that can hinder the growth of the downstream sector and attract investments into the sector.”
In the last five years, said the union, about 70 per cent of the workforce in the downstream sector, especially the marketing sub sector have been thrown into the labour market.
Osinbajo’s effort to save the day
Osinbajo, as acting president, summoned a meeting with the marketers on May 22. Minister of Finance Mrs Kemi Adeosun, Minister of State for Petroleum Resources Dr. Ibe Kachikwu and the Central Bank Governor Godwin Emefiele attended. 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.
MOMAN, IPMAN, DAPPMA and IPPIs, in a joint communiqué issued after a recent meeting in Lagos signed by their legal adviser, Patrick Etim, explained the situation: “The hope that the outstanding debt owed marketers will be paid resulting from the intervention of the Vice President, Professor Yemi Osinbajo appear to be dashed as the payment that was promised to happen in July 2017 is yet to materialise.
“This was devastating to marketers as we are being dragged daily by banks on debts owe and under threat of putting our tank farms under receivership”
“It was expected that the various meetings held between very senior government officials and the leadership of the oil dealers to resolve the issue of the outstanding debt owed to oil marketers will yield the desired result as the figures were fully reconciled and there was commitment from government to pay by the end of July 2017.
“However, Nigerian banks who are carrying the indebtedness of the marketers on their balance sheet have had their hope disappointed because as it stands now the payment of all the debts by the Federal Government have not been received and this has resulted to lot of problems between the banks and marketers.”
The communiqué went on: “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 interest payable due to delayed reimbursement also by the by 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.
“The markers stated that it was only in the first quarter of 2017, that the banks were able to liquidated the Letters of Credit from 2014/ 2015 at the N360/$ as against the N176- 195/$ at the time the LC’s 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 S$1, while the Federal Government agencies based their reimbursement calculation on N197 to US$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 interests until the total debt is fully liquidated.”
The marketers said as a result of these unpaid interest and foreign exchange differentials have gradually become insolvent and financially handicapped to continue operating profitably.
“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 the federation. 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, making a direct appeal for the intervention of Mr. President.”
The 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, they said
They said it is very scary to consider consequences of bank failure in Nigeria, adding that apart from the impact on individuals and businesses some economists project that it would cost the government more than N2 trillion to revive Nigerian banks in the event of failure.
They said that the banks are in a quandary on account of their financing importation of petrol cargoes by the petroleum marketers and so far, there is little evidence that the government has seen the risks in further delaying the payments under the subsidy scheme.
“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.”
While the oil marketers await the payment of monies owed to them as approved and announced by the Federal Executive Council (FEC), they are still unable to transact with banks because their accounts have been classified as non-performing hence cannot be used to transact business under the classification.
The effect of this is that the operations of the marketers have been halted with backlog of staff salaries remaining unpaid for about eight months now.
The workers themselves are in jeopardy of working without knowing when to get paid and losing their jobs.
“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 are pleading with 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 have also expressed their support for Federal Government’s plan to remove fuel subsidy and they urged the government to quickly deregulate the downstream sector of the oil and gas industry to save the national economy from ruin.
