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FG promises to pay N264bn outstanding subsidy claims by March end

By BusinessNews Staff on February 26, 2015

The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala has promised that the federal government will pay N264 billion to fuel marketers as outstanding claims on subsidy, FOREIGN EXCHANGE differentials and interest on delayed payment by the end of March.

The commitment by the minister was to avert the threat by the marketers to stop importation on account of the refusal of banks to provide credit facilities due to the huge outstanding claims.

This development was the outcome of a closed-door meeting between the minister and the chief executive officers of some of the Oil Marketing and Trading (OM and T) companies in Lagos last Monday.

Confirming the agreement reached at the meeting, the Executive Secretary of Major Oil Marketers Association of Nigeria (MOMAN), Mr. Obafemi Olawore, told journalists in Lagos on Tuesday that with the minister’s assurance, the marketers would play their own part to ensure that any form of scarcity of products at this period is averted.

“We have outstanding subsidy and outstanding FOREIGN EXCHANGE and interest. You recall that last year, the federal government, through the Ministry of Finance paid us about N345 billion, which was mainly for 2013 and part of 2014. However, we still have some outstanding claims for 2014 and early part of 2015. The total invoices already sent and processed are about N164 billion on subsidy. On foreign exchange and interest combined, the total amount is around N100 billion now,” Olawore said.

He confirmed that Okonjo-Iweala met with the marketers in Lagos last Monday and gave them a schedule of payment between now and the end of March, which was acceptable to the marketers.

“This means that we believe her and we may only have cause not to believe her if at the end of March, nothing happens. But we believe her. So, the product supply that was actually going to go down will have to pick up, which means that we need to assure ourselves that even if we notice any tightness in product supply anywhere, for the sake of Monday meeting, it is a temporary tightness. Therefore, there will be products,” he added.

He further stated that the minister also promised to pay interest on subsidy claims that are delayed beyond the 45 days stipulated in the Petroleum Support Fund (PSF) guidelines.

Olawore said the marketers’ woes were compounded by the recent devaluation of the naira, which made it impossible for the marketers and Nigerians to enjoy the relief arising from the drop in the international price of crude oil.

According to him, as the international price of crude oil was dropping, the value of the naira was also declining, thereby hiking the price of products, especially diesel.

“For example, petrol the EXCHANGE RATE for bringing products before the devaluation was N171.36 per dollar. At that rate, the landing cost of petrol was N90.67 per litre. There was a time the EXCHANGE RATE rose to N188, that is, N188 was the interbank rate, while the Central Bank of Nigeria (CBN) gave us N171.36. But when it went to N188, the landing cost of petrol rose from N90.67 to N98.36. As at today when the exchange rate has gone to N199 (there is no window again), the landing cost rose to N103.45. So, you see that the main factor here is the exchange rate. If it moves to N215 per dollar, the landing cost will move to N110.84,” he explained.

Olawore said once the exchange rate moved, especially the way it moved by N10, N20, N30, it would erode the gains the marketers and Nigerians would have derived from the fall in the price of crude oil if the rate had been retained at N171.36.

[ThisDay]

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