Oil marketers to shut down depots over $2 billion unpaid subsidy claim (Nigeria)

By Ejiofo Alike | This Day, Nigeria October 5, 2017

Oil marketers have initiated moves to shut down depots nationwide over the inability of the federal government to settle the lingering accumulated debts of over N800 billion subsidy claims.

This is just as the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and Nigerian Union of Petroleum and Natural Gas Workers (NUPENG) have issued notices of an indefinite strike to the marketers in protest over the backlog of salaries owed their members and the looming job losses in the downstream sector, THISDAY has learnt.

The notice of indefinite strike by the oil workers, which was contained in a joint communiqué issued by the marketers after their joint National Executive Council (NEC) meeting held in Lagos on Tuesday, followed what the unions described as the continuous deteriorating welfare of its members working in the various companies owned by oil marketers.

The marketers – Major Oil Marketers Association of Nigeria (MOMAN), Independent Petroleum Marketers Association of Nigeria (IPMAN), Depot and Petroleum Products Marketers Association (DAPPMA) and the Independent Petroleum Products Importers (IPPIs) – which acknowledged receipt of the planned strike by the unions, have also threatened to shut down their depots, pending the resolution of the liquidity challenges in the downstream sector by the federal government.

In the communiqué signed by the legal adviser of the oil marketers Mr. Patrick Etim, the oil marketing firms stated that the unpaid interest and foreign exchange differentials arising from the subsidy claims have led to insolvency and rendered them financially handicapped to continue their operations.

The marketers called on the Muhammadu Buhari administration to keep improving governance, especially by correcting the wrongs of previous administrations and making government responsive to its contracts and responsibilities.

“For the banks, their action is to see how they can avert another round of banking system failure that could be triggered by this huge outstanding non-performing loans owed the banks by oil marketers who cannot pay because the government is yet to pay them,” the communiqué said.

The marketers revealed that the government had in June 2017 made a commitment to pay the outstanding bills before the end of July after the intervention of the Vice-President, Prof. Yemi Osinbajo, who had ordered a reconciliation exercise between the marketers and the Petroleum Products Pricing Regulatory Agency (PPPRA), in his capacity as the then acting president.

According to the oil marketing firms, the reconciliation team was led by the Chief of Staff to the president, Mr. Abba Kyari, and the Minister of Finance, Mrs. Kemi Adeosun.

“Further to the reconciliation, it was gathered that the Federal Executive Council had approved the payment. However, the payment framework was said to have been sent to the National Assembly for approval and up till now there has been no feedback.

“We gathered from reliable sources that the National Assembly claimed that they are yet to receive any such request from the finance minister,” said the communiqué.

The marketers stated that part of the N800 billion debt arose from the non-payment of the balance of over N300 billion under-recoveries on the basis of the PPPRA importation template.

According to them, the debt was reconciled and audited as far back as 2015 and was provided for in the 2015 supplementary budget as well as the 2016 budget.

The communiqué revealed that only about 20 per cent of the amount provided for in the budget was actually paid to marketers in August 2016, while the federal government had promised to pay the balance within three months, adding that nothing further has been paid despite repeated promises.

The oil firms added that the second part of the N800 billion debt arose from the failure of the government and Central Bank of Nigeria (CBN) to provide foreign exchange to banks that financed the importation of the petroleum products, particularly petrol in 2015.

The marketers further disclosed that the banks used their dollar confirmation credit lines with foreign banks to open the Letters of Credit at exchange rates between N168 per dollar and N198 per dollar, according to the approved PPPRA template as at the date of each import.

They said when the Letters of Credits became due, the banks defaulted on their obligations because the CBN did not provide the dollars.

On the part of PENGASSAN and NUPENG, the labour unions also raised the alarm that their members working with the oil marketing companies had not been paid salaries for up to nine months owing to the inability of government to redeem its commitment to pay in spite of Osinbajo’s directive to the finance minister to effect payment on or before the end of July.

Etim said in the communiqué that the unions in their notice of strike, stated that in the last six months, they have been inundated by officials of the various labour units operating in the tank farms and depots across the country, complaining that most petroleum product importers and marketing companies owe their members unpaid salaries.

According to him, the unions also claimed that the children of their members had been sent packing from school as their parents were not in a position to pay the school fees for their wards, while others were systematically being sacked by their employers.

“The most disturbing aspect of this is that many members are now redundant as their employers are not able to operate their bank accounts, with potential massive job losses of our members in the oil and gas sector and other workers in the banking sector due to the growing size of this non-performing loans extended to oil marketers,” the communiqué added.

Etim observed that while many of the oil marketing companies owed salary arrears of up to nine months, some marketers had started retrenchment of workers and were on the verge of shutting down their tank farms.

According to the communiqué, most banks are also planning to take over the tank farms and companies due to their inability to pay back monies lent to import products.

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