N65.1 billion subsidy bebt – Mobil, Total, others threaten to stop fuel import

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Total-logoMajor Oil Marketers Association of Nigeria, MOMAN, has threatened to stop the importation of Premium Motor Spirit, PMS or petrol, if the Federal Government did not pay its outstanding N65.1billion subsidy claims.

The outstanding sum is the combination of the following:

*import claims from 2011 – N49.5billion

*bank interest payments – N13.10billion

*foreign exchange claims – N2.5billion

The majors, comprising Mobil, Total, MRS, Forte Oil and Conoil, however said that only about N9.4billion of the total sum had been paid after much pressure on government, still leaving a huge outstanding of N55.7billion unpaid.

The marketers noted that some of these claims have remained outstanding since 2011, with huge implications on their operations.

The Executive Secretary, MOMAN, Mr. Obafemi Olawore, told journalists in Lagos weekend that “The implication of the non-payment of our claims is that it is affecting our bottom line, and this will lead to a reduction in petrol importation, and eventually the downsizing of workers.”

He noted that one of the six-member group has not been paid since 2011, while the burden of the foreign exchange losses of N2.5billion are being borne by three of the marketers and still counting as long as the claims remain unpaid.

Olawore argued that the majors were not trying to blackmail the government as suspected, noting that the banks were no longer willing to extend credit facilities for members to continue to import fuel due to the high interest rate of over N13.10billion that have accrued since 2011.

“If the banks don’t give us the facility, and government is not paying us, what else can we do? Of course importation will stop because our ability to continue with the process has been weakened. Also, interest charges have eaten deep into our meager reserves, and there may be no other option than to start staff rationalisation,” he said.

Products importation

Petrol and kerosene are the two refined petroleum products approved for subsidy by the federal government, to enable marketers sell the products at regulated pump prices.

However, because of the politics involved in kerosene importation, all other marketers abandoned the process, leaving only the Nigerian National Petroleum Corporation, NNPC with the burden of importing, and selling at N50/litre prescribed by government.

Other marketers sell kerosene at between N100 and N170/litre depending on location and outlet.

Currently, the majors are the second largest importers of petrol second to the, NNPC, while the independent marketers merely complement imports with whatever quantity they could bring in.

However, in view of the clamp down by banks, many of the independents have been run-over, while some are placed under receivership.

The developments resulted in significant drop in the level of imports done by the independents, while the majors, using their international affiliations have been able to remain afloat.

How the claims accumulated

In the wake of nationwide crisis on account of the pump price increase of petrol and subsequent probing of the subsidy regime, government froze further payments of subsidy claims until the conclusion of the probes.

“At the peak of the crisis, government promised to pay us as soon as the probes were over. But it took a long time before they started to pay, and this led to the accumulation,” Olawore said.

Furthermore, to check galloping interest charges, government and the marketers agreed on a 45-day payment scahedule from when the claims were compiled to the point of payment.

Olawore disclosed: “But they (government) are not following the 45-day agreement. From January 2011, when the subsidy crisis started up till early June, nothing was paid to us, until we started making noise and they started paying from mid-June.”

In all of these, he noted that the banks are the happiest because of the interests accruable, such that one of the majors paid as much as N4.04billion as interest in 2012, and will pay another N605.8million in 2013.

 

Information from Vanguard was used in this report.