Oil Marketers Groan under N180bn Unpaid Verified Subsidy Claims

18 Oct 2014 (This day Newspapers)
Minister of Finance and Co-coordinating Minister for the Economy, Ngozi Okonjo-Iweala

Fall in crude oil prices may stall payment

Yemi Adebowale

About 46 oil marketers in the country are grappling under the yoke of heavy debts following the failure of the Federal Ministry of Finance to pay them the outstanding verified subsidy claims and importation cost amounting to almost N180 billion as at October 10 this year.

About N19 billion is outstanding for 2013 discharges while about N161 billion is outstanding for 2014 discharges.

However, the oil marketers might have to wait longer for their subsidy refunds. Sources said falling crude oil prices, now at about $80 per barrel, and expected to fall further, have diminished federal government’ revenue and capacity to pay and even sustain the subsidy regime.

Furthermore, the approval given by the Minister of Finance and Co-coordinating Minister for the Economy, Ngozi Okonjo-Iweala, suspending reimbursement associated with the payment of interest charges and foreign exchange differential outside the 45 days circle had further compounded the woes of the oil marketers.

As a result of the financial crunch, Thisday gathered that most of the oil marketers have slowed down on their 2014 Quarter 3 importation while virtually all of them have not commenced importation of Quarter 4 allocations.

One of the major marketers who spoke to THISDAY on condition of anonymity after an emergency meeting of the major oil marketers in Lagos on October 10 warned that queues might start appearing across the states if urgent steps are not taking to address the subsidy debts to the marketers, “because most of the marketers have scaled down importation.”

The source said further that another claim of about N82 billion for 3rd quarter allocation importations have been sent to the government for verification and clearance.

“If we add this to the outstanding cleared N180 billion, then we will have a total of N262 billion claims outstanding to our members as at October 10, 2014,” said the source

It was further gathered that the frustrated oil marketers met with Okonjo-Iweala early last month, to demand for the immediate payment of the verified claims but got a negative response from the minister. A source at the meeting said she bluntly told the marketers that there was no money to pay the debt which at that time was about N176 billion

The source said the marketers subsequently met with Petroleum Resources Minister, Diezani Alison-Madueke, and piled pressure on her to “talk to Okonjo-Iweala” to release their money.

Following the meeting, the source confirmed that a letter was written to the finance minister by Alison-Madueke, pleading with her to take urgent action regarding the unpaid verified claims to avert an end-of-the-year fuel crisis.

A copy of the petroleum minister’s letter dated September 4 and addressed to Okonjo-Iweala was titled: “Re: Subsidy-related Payments – Release of 2013 Marketers’ Claims and Payment of Importation Cost.”

In it, Alison-Madueke stated: “CME will recall that in 2014, Sovereign Debt Note (SDN) of N149,636,133,457.76 was issued to marketers as claims processed for 2013 discharges. Out of this amount, N19,043,957,655.42 for Batches U/13 and W/13 still remain as unsettled claims.

‘Total volume of 3,694,769,663.50 litres of PMS with an equivalent amount of N179,621,634,671.15 was verified by the Petroleum Product Pricing Regulatory Agency (PPPRA) for which SDN was issued to marketers for 2014 discharges. Out of this amount, SDNs for the sum of N19,307,882,666.50 were released to marketers while the corresponding SNDs for the sum of N160,313,752,004.65 are yet to be released by the Debt Management Office as at 29th August, 2014. A summary of 2013/2014 verified claims for other marketers for which SDNs are yet to be released stands at N179,357,709,660.07.”

The petroleum minister further pleaded with Okonjo-Iweala to reverse the order suspending reimbursement associated with the payment of interest charges and foreign exchange differential to the marketers.

Alison-Madueke said: “The PPPRA has brought to my attention, a letter issued by the DMO conveying the approval of the CME for the suspension of payment to marketers in respect of interest charges and foreign exchange differentials on claims outside the 45-day payment cycle.
In the said letter, the CME directed the DG-DMO to notify the PPPRA that no more payments of interest and foreign exchange differentials shall be entertained by the Ministry of Finance.

“In view of the foregoing, I wish to draw your attention to the approval granted by the Federal Government in 2010 guaranteeing the payment of all additional cost of importation outside the 45-day payment cycle. This, by implication includes both interest and foreign exchange differential cost.

“Furthermore, CME may kindly note that over time, government has not been meeting its financial obligation for processed claims within the 45-day cycle as provided for in the PSP scheme. For example, processed BatchesU-13, V-13 & W-13 for year 2013 imports and Batches B-14 to h-14 (for year 2014 imports) amounting to N179,357,709,660,.07 are yet to be paid. The CME/HMF may which to note that Batch U-13 is 150 days old.”

The petroleum minister subsequently pleaded with Okonjo-Iweala to ensure the immediate release of marketers’ claims in order to avert hiccups in the Premium motor Spirit supply chain, “especially as we approach the high demand period and upcoming political activities.”

She further urged her to approve all costs of importation (interest charges and foreign exchange differential) arising from delay in payment of subsidy outside the extant 45-day payment cycle.

According to documenst made available to THISDAY by sources I the petroleum ministry, some of the 46 marketers gasping for breath due to the unpaid verified claims as at September 4 this year are: NIPCO Plc (N12,883,968,363); Folawiyo Energy (N10,149,988,658); Aiteo Enrergy (N9,657,514,426); North West Petroleum (N9,043,130,815); Oando (N8,574,595,367); Masters Energy (N7,308,356,930); Integrated Oil and Gas (6,290,836,305); Total Nigeria Plc (N6,464,626,385); TSL Logistics (N6,370,046,205); and Rain Oil with N6,144,861,284