A Review of the Nigerian Energy Industry

Rising debts: Oil marketers may sack workers

Petrol dripping from pump.
Petrol dripping from pump.

03 May 2015, Lagos – Downstream operators in the nation’s petroleum sector are under pressure to reduce their staff strength and constrain operations, following rising debts in the sub-sector, according to findings by our correspondent.

The oil marketers, as the operators are popularly called, blamed the Federal Government for the problem, saying huge subsidy arrears owed them by government had depleted their liquidity base and impacted on their business.

According to the marketers, the sub-sector has seen no expansion in recent times owing to the non-availability of the resources to grow their business and tap into new opportunities.

Confirming this in an interview with our correspondent, the Executive Secretary, Major Oil Marketers Association of Nigeria, Mr. Thomas Olawore, said in 2013, MOMAN was controlling 60 per cent of the retail market, while the Nigerian National Petroleum Corporation was in charge of the remainder.

“But now, MOMAN is controlling less than 40 per cent of the retail market, while the NNPC is controlling over 60 per cent,” he said.

Olawore explained that the problem was not limited to the association’s members, but also extended to members of the Depot and Petroleum Products Marketers Association.

A document obtained by our correspondent showing the operation data of MOMAN indicated persistent reduction in product importation by members of the association since last year.

For instance, for ‘Batch T’ consignment in 2014, N21.9bn was expended on product importation, while for ‘Batch U’ 2014, ‘Batch A’ 2015 and ‘Batch B’ 2015, N8.6bn, N6.8bn and N2.9bn were recorded, indicating a steady drop in one year.

Olawore said the marketers were currently experiencing hardship as a result of cash flow constraints caused by delayed subsidy payments by the government.

The situation, he noted, was being compounded by devaluation of the naira, higher inflation and increase in lending rates.

Due to the delay in the payment of the verified subsidy sums, he said the marketers could no longer fulfil their financial and non-financial obligations, adding, “Notwithstanding this, they (marketers) have continuously supplied petroleum products to the country, especially during the just concluded general elections.

“The consequences of this development will include a significant scale down of petroleum products supply to the country and MOMAN members being left with no option but to streamline overhead costs and workforce in the very immediate future.”

Before Thursday this week, the aggregate subsidy arrears owed the marketers by the Federal Government wa put at N354.4bn.

This amount includes the N98.2bn that the Federal Government issued a Sovereign Debt Note (a post-dated financial instrument) for, expected to mature at the end of last month.

The balance of N256.2bn comprises the actual subsidy arrears for part of 2014 (Batches ‘T’ and ‘U’) and 2015 (Batches ‘A’ and ‘B’) and the foreign exchange differentials and bank interests.

The actual subsidy for the period was put at N40.3bn, while the value of the foreign exchange differentials and accrued interest was N215.9bn.

Although the Federal Government N154.2bn of fuel subsidy arrears, the marketers said there was little hope that the current nationwide scarcity of petrol would abate any time soon.

Olawore said, “The government had paid N154.2bn out of N354.4bn and we are left with a balance of N200.2bn. What happens to the N200.2bn? That is why we requested that the government invites us so that we can be told how it intends to liquidate the remaining N200.2bn.”

He also said members had been finding it difficult to continue to import petrol for a while now, and that though it was the wish of MOMAN and DAPPMA to continue supply the product, the market situation was getting tougher.

He said in March and April this year, the government made a part payment of N37m for foreign exchange differentials but did not pay the accrued interests or the actual subsidy.

The MOMAN spokesperson said the country would be in for another round of product scarcity if the current situation was not addressed by the government, adding that the NNPC would not be able to meet the huge demand for petrol in the country alone.

In a recent letter to the Minister of Finance, Dr. Ngozi Okonjo-Iweala, the association stated that despite previous assurances from the government to reimburse the marketers for the under recovery due to them as verified by the Petroleum Products Pricing Regulatory Agency, it had failed to honour its agreement with the marketers.

– Punch

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