Q3 petrol imports: Marketers can’t meet obligations

30 June 2012, Sweetcrude, LAGOS—Petroleum marketers operating in Nigeria’s downstream petroleum sector say they will not be able to fulfill their obligations with regard to importing the anticipated quantity of premium motor spirit, PMS, or petrol, for the third quarter of 2012, as directed by the government.

The marketers said they were incapacitated due to the delay in the payment of outstanding N200 billion subsidy claims for the balance of 2011 and current 2012 claims.

They warned that failure to urgently meet their demands “as a matter of extreme urgency” might result in imminent scarcity of petrol in the market.

In an advertorial on Friday, the Petroleum Products Pricing Regulatory Agency, PPPRA, issued import permits to the Nigerian National Petroleum Corporation, NNPC, and 36 other marketers to import petrol for the country for the third quarter of the year.

However, in a letter to PPPRA, also copied the President as well as the Ministers of Finance and Petroleum Resources, the marketers declared that they will not be able to import as much as expected.

Entitled ‘PMS Allocations Under the Petroleum Support Fund (PSF) Scheme for the Third Quarter 2012’, the marketers, in the letter, signed by their respective trade groups, identified five factors which would make them unable to fulfill their obligations.

They said: “The current business environment in the sector makes it necessary to bring to your attention factors that inhibit our ability to import the said volumes in Q3 2012:

i. Due to the fact that issuance of Sovereign Debt Notes covering balance 2011 and current 2012 PMS import transactions were initially severely delayed and now currently suspended, we have huge outstanding, verified and unpaid subsidy claims in excess of N200 billion from the Federal Government.
ii. Non-reimbursement of the subsidy claims impairs the ability of any company to meet its obligations to the banks for loans advanced for the purpose of importing PMS under the scheme for the Nigerian public. iii. This inability to repay has led to significant interest rate and exchange rate differential exposure which have to be claimed by the participating companies and reimbursed by the Federal Government.
iv. Conflicting statements by senior Government officials as to the adequacy or inadequacy of the amount appropriated for subsidy in 2012 and the subsequent halt in issuance of the Sovereign Debt Notes as stated above, has led to an atmosphere of extreme uncertainty in which most banks are reluctant to provide further funding for importers and others are only willing, under extremely severe and uneconomic terms for our companies.
v. Meanwhile, the volume of imports by our companies is dwindling at an alarming rate, due to non-reimbursement of outstanding subsidy claims and the inability of importing companies to secure financing. Despite the recent allocations awarded, there is currently no prospect for a reversal of this trend which has immense implications for the efficient supply and distribution of PMS to the Nigerian public.
In view of the foregoing, they demanded among others that,
a. The Ministry of Finance ensures the immediate resumption of the issuance of Sovereign Debt Notes by the Debt Management Office for all legitimate transactions that have been completed and audited.
b. The PPPRA ensures conclusion and calculation of all outstanding legitimate claims (including but not limited to foreign exchange and interest rate differential claims) by June 30th, 2012.
c. The Ministry of Finance ensures cash backing for the Sovereign Debt Notes that have already been issued and payment effected.
d. All valid outstanding claims for 2011 and 2012 be paid without further delay, and,
e. A statement assuring the finance community of the Federal Government’s ability and willingness to make good its obligation to importers in relation to the subsidy scheme be issued by PPPRA and the office of the Honourable Minister of Finance.
They further argued that “these actions will provide the necessary assurance to importers and financial institutions to enable continued importation and distribution of PMS in the country.”
Signatories to the letter include representatives of the majors, and independent marketers as well as independent depot.

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