A Review of the Nigerian Energy Industry

Nigeria: Govt owes marketers N220bn subsidy claims

ngozi-okonjo-iweala 116 October 2013, Abuja — The federal government is said to be owing oil importers over N220 billion subsidy claims under the Petroleum Support Fund (PSF) which may lead to inability of marketers to supply petroleum products.

Petroleum marketers said they are unsure of their ability to adequately supply petroleum products during the yuletide season due to the mountain of debts owed them.

Executive Secretary of Major Oil Marketers Association of Nigeria (MOMAN) Mr Obafemi Lawore told our correspondent in Lagos yesterday that the subsidy claims represent oil discharges between 2011 and this year.

He said the outstanding subsidy pay increased as a result of delay in the payment of verified claims and principal sum, unbearable bank interest rate and foreign exchange differentials.

He said the development has now put importers at cross-roads as they do not have money to import petroleum products into the country.

Lawore wondered why marketers are being owed huge sums despite their efforts in ensuring that the country is not in short supply of petroleum products.

The federal government had recently established a technical working committee of stakeholders on delayed payment of PSF subsidy claims of marketers to quicken the payment of subsidy to importers.

The committee’s recent report said the interest rate regime provided for financing in the Petroleum Products Pricing Regulatory Agency (PPPRA) template is indexed to the 45 days payment cycle in the PSF agreements.

It said marketers are debited by their banks on additional days of non-payment of subsidy refunds which is usually a minimum of 22 per cent and can go as high as 25 per cent which it said results to huge exposures of the marketers on transactions carried out.

The report said the prevailing reality is that the essence of the sovereign instruments has been defeated by the prolonged delay in payment of marketers’ claims.

“The unfortunate reality today is that the Sovereign Debt Notes (SDNs) which are supposed to be redeemed immediately upon maturity now stay unredeemed for an additional 21 days or more. Out of the 271 transactions for marketers in 2013 for instance, 132 are yet to be paid; while indebtedness range from 50 days to 200 days for transactions that were funded based on a provision of 45 days’ financing cost.”

He said that the marketers demanded the immediate payment of all their outstanding arrears plus interest and forex differentials for all delayed payments.

The report said given the fact that the PSF dwells on the principle of restitution, reimbursement under the scheme on the old naira exchange rate is inimical to sustaining products supply to the system.

Efforts to get the reaction from office of the Coordinating Minister of the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, who is in charge of subsidy disbursement probed abortive.

Phone calls, email and text messages sent to Mr Paul C Nwabuikwu, Special Adviser to Dr Iweala were not replied as the time of press.

In her recent reaction on the issue, Dr Iweala said government has reduced public spending on oil subsidy payments from N2.2 trillion in 2012 to N971 billion last year.

She said the Federal Ministry of Finance has released the sum of N46.8 billion as latest payment to oil marketers whose claims have successfully gone through the verification process.

Early in September the minister said, so far this year, a total of N287 billion has been paid in verified claims to verified marketers.

“We also hired new auditors and we put in place different checks and balances. As a result, last year, we brought subsidy payment down to about N950 billion, and we expect that this year, we will pay about N971 billion,” the minister said.

– Daily Trust

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