$2bn subsidy debt: Oil marketers in tight spot

Major petroleum marketers in the country are currently in a tight spot due to the Federal Government’s inability to pay them arrears of their subsidy claims amounting to over $2 billion.

The sum, National Daily gathered includes loans taken from banks to fund petroleum product importation, interest charges and a refund on exchange rate differentials.

With no allocation for subsidy payment in the 2017 budget, Oil majors such as Oando, Forte, Mobil, Total may be forced to sack staff in a bid to cut cost.

In a joint communique issued on Tuesday, they urged the government to authorise the payment of outstanding interest and foreign exchange differentials owed them to save their business from total collapse.

The marketers said they owed some Nigerian banks over $2bn, which they took as loans to import fuel, adding that the interest had accumulated over time because the government had yet to pay them or pay the banks interest on the loans as agreed.

The communiqué said, “The hope that the outstanding debts owed marketers will be paid, resulting from the intervention of the Vice President, Prof. Yemi Osinbajo, appears to have been dashed as the payment that was promised to happen in July 2017 is yet to materialise.

The marketers said they opened Letters of Credit at exchange rate of N197/$1 while petrol cargoes were supplied and sold at the selling prices approved by the government and the repayment was calculated using the above exchange rate.

They said, “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.”

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In addition to staff who may lose their jobs, their shareholders will also be hard hit by a likely drop in dividends.

The companies could decide to embark on a strike to put pressure on the government to pay up. Banks are also affected by the delayed payment as making provisions on the debt which puts pressure on their balance sheets. An increase in provisions means banks will have to raise more capital and could decide to cut dividend payments.

A lack of working refineries, has led to Nigeria depending on imported refined petroleum products.  When crude oil prices spike up in the international market, Nigerians are forced to pay more.

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Government in a bid to shield citizens from the impact, instituted a subsidy system where it paid marketers a particular amount in order to maintain price stability. In addition, government regulates the price at which petrol can be sold in the country.  The system was scrapped by the Buhari administration due to corruption surrounding it.