Marketers Implore FG To Clear N800b Debt

Marketers Implore FG To Clear N800b Debt
  • PublishedJune 15, 2017

The marketers, which are owing banks over $1.2 billion, appealed to Acting President Yemi Osinbajo for “urgent intervention”.

Marketers yesterday spoke of financial constraints, begging the Federal Government to pay them N800billion spent on fuel import. The cash also covers interest on bank loans.

In a communiqué after their meeting in Lagos, signed by their legal adviser, Mr. Patrick Etim, the marketers, including the Depot and Petroleum Products Marketers Association (DAPPMA), said Osinbajo met with them on May 22, with Minister of Finance Kemi Adeosun, Minister of State for Petroleum Resources Ibe Kachikwu and Central Bank Governor Godwin Emefiele in attendance. The meeting was on how to pay the debt.

After the meeting, Osinbajo, the marketers said, directed the Minister of Finance to resolve the problem.

The communique reads: “This debt has greatly impeded our ability to operate, our operating funds have been eroded, curtailed our ability to access funds from the financial institutions and some of our members have resorted to staff retrenchment due to inactivity, the marketers said. 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 immediate payment of the debt.

“The foreign exchange differentials, which arose as a result of the initial devaluation of the naira by the last administration from the initial N165/S$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 Federal Government agencies.

“The recent further devaluation of the naira from N195 to N285 and later to over N305 to S$1, while the Federal Government agencies based their reimbursement calculation on N197 to S$1, has left members our association with additional debt burden in excess of N300billion. The downstream subsector is now saddled with a debt burden of over N400billion, 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 federation. In addition, properties provided by marketers as securities for these funds are in the process of being auctioned including some storage facilities such as tank farms.

“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 premium motor spirit (PMS) import scheme but the major challenge on the economy has impeded complete success hence we are making a direct appeal to Acting President to intervene.”

According to the communiqué, the marketers are unable to pay because their bank debts form part of what they too are being owed by the government. Their inability to pay or service the loans, they said, was hindering their business and threatening the affected banks’ operation and the financial industry.

“Government’s debt, which arose from arrears of unpaid imported petrol supplied to the country as a result of the contract the Federal Government entered with marketers mandating them to import and supply petrol to the market on the condition that it (government) shall pay the difference between the landing cost 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 the exchange rate of naira/dollar. A key term of the government’s contract with marketers is that the under-recovery payments shall be paid to marketers within 45days 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 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.

“The outstanding matured Letters of Credit are currently over $1.2billion. Because many Nigerian banks were involved in raising this fund, the entire Nigerian banking system is at risk on account of these transactions,” they added, noting that the debt prevents banks from providing loans to them for future petrol imports and even to players in other sectors of the economy,” the marketers said.

They said the banks were in quandary over the debt. “ Besides, should the banking sector collapse, it will cost the government over N2trillion to revive it. But there is little evidence that the government sees 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. Therefore, honouring contract agreements by the government would help boost local and foreign investments.

“Nigeria is currently not experiencing scarcity of petroleum products because NNPC has increased importation and supply of products, however, NNPC cannot sustain it without marketers importing.”

Leave a Reply

Your email address will not be published. Required fields are marked *