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Oil marketers read Riot Act to FG over Subsidy Debts, Fuel Scarcity Looms

By on June 29, 2012

Oil marketers in the country have refused to embrace their Q3 import allocation quotas due to the failure of the Federal Government to remit N 200 billion in subsidy claims owed them. The Coordinating Minister of the Economy, Ngozi Okonjo Iweala stoppped subsidy payments weeks ago in order to allow the Federal Government audit the process. The fuel subsidy regime as currently tructured threatens to consume the Nigerian economy due to high-level corruption and rampant fraud.

The marketers say they cannot access funds from banks due to the N 200 billion subsidy debt owed them. In a joint letter written by the marketers major associations to the Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), Mr. Reginald Stanley, the marketers listed their grievances.

The letter reads: “We the downstream petroleum industry companies from the private sector participating in the PSF scheme hereby acknowledge receipt of the Q3 2012 PMS allocations.

“The current business environment in the sector makes it necessary to bring to your attention factors that inhibit our ability to import the said volumes in Q3 2012.

“Due to the fact that issuance of Sovereign Debt Notes covering balance 2011 and current 2012 PMS import transactions were initially severely delayed and now currently suspended, we have huge outstanding, verified and unpaid subsidy claims in excess of N200 billion from the Federal Government.

“Non-reimbursement of the subsidy claims impairs the ability of any company to meet its obligations to the banks for loans advanced for the purpose of importing PMS under the scheme for the Nigerian public.

“This inability to repay has led to significant interest rate and exchange rate differential exposure which have to be claimed by the participating companies and reimbursed by the Federal Government.

“Conflicting statements by senior government officials as to the adequacy or inadequacy of the amount appropriated for subsidy in 2012 and the subsequent halt in issuance of the Sovereign Debt Notes as stated above, has led to an atmosphere of extreme uncertainty in which most banks are reluctant to provide further funding for importers and others are only willing, under extremely severe and uneconomic terms for our companies.

“Meanwhile, the volume of imports by our companies is dwindling at an alarming rate, due to non-reimbursement of outstanding subsidy claims and the inability of importing companies to secure financing. Despite the recent allocations awarded, there is currently no prospect for a reversal of this trend, which has immense implications for the efficient supply and distribution of PMS to the Nigerian public. Based on the foregoing, we hereby request that as a matter of extreme urgency and as the only means to ensure continued importation and supply of regulated products (PMS and HHK), the following actions are taken:

•The Ministry of Finance ensures the immediate resumption of the issuance of Sovereign Debt Notes by the Debt Management Office for all legitimate transactions that have been completed and audited.

•The PPPRA ensures conclusion and calculation of all outstanding legitimate claims (including but not limited to foreign exchange and interest rate differential claims) by June 30, 2012.

•The Ministry of Finance ensures cash backing for the Sovereign Debt Notes that have already been issued and payment effected.

•All valid outstanding claims for 2011 and 2012 be paid without further delay.

•A statement assuring the finance community of the Federal Government’s ability and willingness to make good its obligation to importers in relation to the subsidy scheme be issued by PPPRA and the office of the Honourable Minister of Finance.

“We believe that these actions will provide the necessary assurance to importers and financial institutions to enable continued importation and distribution of PMS in the country.”