Except the Federal Government pays all petroleum subsidy arrears of over $2 billion (N720 billion) owed oil marketers, many employees in the downstream sector may soon be thrown into the labour market.
The oil marketers have disclosed plans to embark on mass retrenchment of workers as government fails to pay the outstanding subsidy owed on the importation of petroleum products, accrued interest on loans from banks and exchange rate differential.
The government’s delay in the payment of the over N720 billion debt has made marketers to halt the importation of petrol, leaving the Nigerian National Petroleum Corporation (NNPC) to become the sole importer of the essential commodity. The marketers said as a result of the non-payment of interest and foreign exchange differentials, they had gradually become financially handicapped to continue operating profitably.
Both the Ministry of Finance and the Petroleum Products Pricing and Regulatory Agency (PPPRA) could not be reached for comments last night. Text messages sent to the mobile phones of their spokesmen — Lanre Oladele (finance ministry) and Salisu Saleh of the PPPRA— did not elicit any response as at press time, even as several calls put to their phones rang out. But presidency sources had confirmed to The Guardian that efforts were being made to settle all outstanding issues in the sub-sector.
The marketers, who operate under the aegis of Major Oil Marketers Association of Nigeria (MOMAN); Independent Petroleum Marketers Association of Nigeria (IPMAN); Depot and Petroleum Products Marketers Association (DAPPMA); and Independent Petroleum Products Importers (IPPIs), added that government’s delay in settling all the debts was threatening massive investment in the downstream sector.
The marketers appealed for an urgent intervention of government by the authorisation to pay outstanding interest and foreign exchange differentials owed them to date to save their businesses from total collapse. They alleged that government violated the agreement reached with them on payment schedule.
They claimed that the commercial banks that lent money to them for the importation of petrol were still in despair following the weight of the indebtedness of the oil sellers, even as their operations nationwide were fast grinding to a halt. They said the hope that the outstanding subsidy would be paid following the intervention of the Vice President, Yemi Osinbajo, appeared to have been shattered as the payment promised to be effected in July 2017 was yet to materialise.
The marketers stated that it was only in the first quarter of 2017 that the banks were able to liquidate the letters of credit from 2014/ 2015 at N360/$ as against the N176-195/$ at the time the LC’s were opened because of lack of foreign exchange from the government, leaving their accounts with the huge differential.
“The recent further devaluation of the naira from N195 to N305, and later to over N365 to US$1, while the Federal Government agencies based their reimbursement calculation on N197 to $1, left petroleum marketers within our association with additional debt burden in excess of N600 billion. This is in addition to the over N250 billion arrears owed.
“The downstream sector as a whole, is now saddled with a debt burden of over N850 billion which keeps rising because the banks are still charging interests until the total debt is fully liquidated,’’ the marketers claimed.
On the implication, they said the operations of the marketers had been halted with a backlog of staff salaries remaining unpaid for about eight months now.
But the other stakeholders called for dialogue, emphasising the need for the government to provide incentives and create an enabling environment for the establishment of private refineries.
The Chairman, Lagos Chamber of Commerce and Industry (LCCI) Petroleum Downstream Group, Ken Abazie, described the planned retrenchment by oil marketers as a normal business decision in a challenging environment.
He said that the oil marketers were in business to make profit and therefore may be forced to retrench if there were no returns on investment.
According to Abazie, “if you are no more making money, I wonder why you should still be keeping employees in the company. The current fixed price of N145 a litre for petrol is not profitable for marketers. If we are not importing, automatically, we are not in business and if we are not in business, there is no need to keep the workforce. This is the current challenge for every investor in the downstream sector.”
He said that businesses were crumbling, as NNPC became the sole importer of petroleum products in the country.
To Abazie, the funds the government is using for the importation of petroleum products should be directed to capital projects.
The Executive Secretary of the association, Obafemi Olawore, urged the Federal Government to pay the outstanding debts of $2 billion owed on the importation of petrol products and the accrued interests on bank loans.