Fg Approves N2.7tn For Fuel Marketers Others

Reprieve may have come the way of oil marketers as the Federal Executive Council (FEC) on Wednesday put in motion the machinery for the payment of N2.7 trillion owed them and other contractors, pensioners and state governments.

It will be recalled that over the course of the last one year, petroleum marketers have been unable to effectively discharge their functions due to fuel subsidy arrears owed them by the federal government, which resulted in their inability to import premium motor spirit (PMS), also known as petrol and sell at the price cap of N145 per litre.

As a result, in order to guard against plunging the nation into another debilitating fuel scarcity, the Nigerian National Petroleum Company (NNPC) took over the importation of the product for the past one year, in an arrangement that has been described by both marketers and state officials as unsustainable.

On their part, oil marketers claim that the federal government owes them outstanding debts ranging between N720 billion to N800 billion on importation of petrol products and the accrued interests on bank loans, leading to retrenchment in the banking and the oil and gas sectors.

In view of the latest move to offset the debts, experts and stakeholders in the oil and gas sector have urged the Federal Government to ensure the full payment of all outstanding fuel subsidy claims to enable oil marketers resume importation of Premium Motor Spirit (PMS), in which the bulk of their businesses lie.

The Chairman, Depot and Petroleum Products Marketers Association (DAPPMA), Dapo Abiodun, said in addition to paying the marketers’ outstanding $2 billion claims, a permanent solution is to remove the cap on the pump price of petrol and fully liberalise the downstream sector.

"Today, the NNPC now imports about 90 per cent of the volumes. How are they doing it? They are doing it because they have the crude. They are giving away crude for petrol. However, whether you give away crude for petrol or whatever you do; it means there is a subsidy that is being warehoused somewhere. There is no provision for subsidy in the budget, so it is postponing the evil day"' he noted.

Abiodun added that Nigerians were not paying more than N145/litre but our neighbours in the West and Central Africa region are. "Therefore, we are effectively subsidizing our neighbours in Lome, Cotonou, Chad and Cameroon; because for as long as the pricing here is lower than that of our neighbours, it is an incentive to smuggling."

The Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN) has welcomed the latest development and appealed to the Federal Government to pay the outstanding fuel subsidy claims to its members to pay back their bank loans.

Olawore said this was imperative because in the NNPC's role as sole importer of petroleum products, the Federal Government was paying over N300 million daily as fuel subsidy, which made it possible for it to import and sell at the price cap of N145 per litre.

Briefing journalists at the end of the weekly FEC meeting presided over by acting President Yemi Osinbajo in the State House, the Minister of Finance, Mrs. Kemi Adeosun, said the council approved a process for the validation and payment of liabilities inherited by the federal government since 1994.

The minister gave the breakdown of the total verified N2.7 trillion liabilities to include: discounted N1.93 trillion owed contractors and suppliers as well as N740 billion outstanding pensions and promotional salary arrears reconciled by a committee set up by the Ministry of Finance on the order of the acting president in March.

She said the arrears which had accumulated over the years would be paid through bonds and promissory notes issuance after a strict validation process, explaining that clearing the liabilities would go a long way in stimulating economic activities.

“The FEC approved the Ministry of Finance’s proposed validation process and promissory note and debt issuance programme to resolve a number of inherited and long outstanding federal government obligations to contractors, state governments and employees.

“This will be followed by a request to the National Assembly to approve the programme ahead of implementation.

“In March 2017, the Economic Management Team, under his leadership Acting President Yemi Osinbajo, mandated the Minister of Finance to chair a committee that would establish a process to confirm the validity of inherited federal government obligations, and propose a mechanism to resolve them.

“These obligations largely consist of dues owed to state governments, oil marketers, power generation and distribution companies, suppliers and contractors by federal government parastatals and agencies, payments due under the export expansion grant (EEG), outstanding judgment balances as well as pension and other benefits to federal government employees. Some of the obligations date back to as far as 1994. The resolution of this will significantly enhance liquidity in critical sectors of the economy.

“Following an exhaustive process of reconciliation, the committee has been able to provisionally confirm a discounted total of N2.7 trillion of obligations, consisting of N740 billion of outstanding pensions and promotional salary arrears (not discounted) and N1.93 trillion (discounted) of other obligations including dues to federal government contractors and suppliers. These numbers are aligned with existing federal government estimates, and in some cases, are lower than previously estimated.

“The supplier and contractor obligations will be resolved through a strict process of final validation, following which those confirmed will be settled through the issuance of liquid promissory notes (ten-year tenure) phased over a three-year period to minimize impact on liquidity and with preference given to those willing to offer the largest discounts. Obligations owed to individuals (for example pensions and employee benefits) will be resolved through the issuance of specific bond instruments, again phased over the next three years.

“These obligations will then be incorporated into the Medium Term Expenditure Framework (MTEF) by the Ministry of Budget and National Planning,” Adeosun said.