26 February 2013, Sweetcrude, Abuja – The management of the Nigerian National Petroleum Corporation, NNPC, has said the so called $1.56bn loan the Corporation is alleged to be proposing to obtain is actually not a loan but a forward sales arrangement to offset accumulated legacy liabilities incurred as a result of crude oil and product losses, pipeline vandalism and demurrage on products in the strategic reserve stock.
The Group Managing Director of the NNPC, Andrew Yakubu, stated this while making a presentation to the House of Representatives Joint Committees on Petroleum Resources (Upstream), Petroleum Resources (Downstream), Aids, Loans and Debt Management and Justice in Abuja.
Yakubu maintained that the Corporation is contractually oliged to pay petroleum products import invoices 45 days after laycan, adding that these invoices had extended to over 360 days after laycan in recent time due to obvious cash flow challenges.
“The non-reimbursement by Federal Government of the Petroleum Products Price Differential to NNPC has gradually led to accumulated and unpaid petroleum products invoices of about US $3.5bn,” Yakubu revealed.
He informed that petroleum products importers have become agitated over the non-payment of their petroleum products invoices some of which were over three years old, adding that the exposure of domestic banks is about US $1.5bn, and default of this magnitude of exposure could lead to another round of banking crisis.
The NNPC GMD stated that the continued delay portends dire consequences ranging from major negative impact on the sovereign credit rating to costly litigation against the federal government in foreign courts, disclosing that some of the importers are already in foreign court with the NNPC.
He said that for the NNPC to honour its obligations while addressing the risk of sovereign default and potential banking crisis that could ensue, the NNPC Board of Directors approved the forward sale structure as an alternative for petroleum products import stressing that the arrangement was not a loan but sale of crude oil to be produced in the future.
In his remarks, the Chairman of Petroleum Resources Upstream, Hon. Muraina Ajibola, stated that the committee was investigative in nature and requested the NNPC to submit all the documents demanded from the Corporation to enable it carry out its assignment.
