FG’s huge debt to oil marketers

A major fuel scarcity ahead of the yuletide season may have been averted by the Federal Government which conceded to commence payment of its N800 billion debt to oil marketers in the country. The marketers last week issued a seven-day ultimatum to the government, at the expiration of which they would ground operations in all oil petroleum product depots across the country.

In their letter to government, the oil marketers asked it to consolidate the outstanding forex differentials and the interest components of its indebtedness to them up to the end of December 2018 and make such payable to them through call. The threat was important because it was jointly issued by Major Oil Marketers Association of Nigeria [MOMAN], Independent Petroleum Products Importers [IPPI] and Depots and Petroleum Products Marketers Association, DAPPMA. With the intervention of the National Assembly, the government agreed to pay the outstanding debt in tranches of N236 billion as first installment and N348 billion being the second in 2019, while the balance would be spread out over time.

IPPI’s legal adviser Patrick Etim said the ultimatum became necessary because banks were seizing the marketers’ assets, leaving them with no other option than to put pressure on the government to pay its debts to them. Etim added, “As I speak, nothing has been paid several months after several assurances received from government saying that it would pay off the outstanding debts. The only way out is for the government to pay oil marketers the outstanding debts through cash option instead of promissory note being processed.” He also said beyond other fallouts, thousands of jobs were on the line if marketers begin a cut down of their work force in order to accommodate the pangs of government’s prolonged indebtedness.

Already, there is palpable fear among Nigerians that another painful round of fuel scarcity could mar this year’s festive season, forcing many people to cancel travel plans or to pay for it through their noses. The problem this time is due to government’s failure to honour its legitimate obligations. The syndrome of government dithering over its debts has destroyed thousands of businesses not only in the petroleum industry but also outside it, across the country and over a long period. This attitude of government has been a big disincentive to businesses. It is inimical to the growth of indigenous enterprise, and it is also a factor in the endemic corruption in our public life.

Indebtedness of government to oil marketers is not a new thing in Nigeria. In fact, it has become a recurring decimal. Although the present indebtedness originated from the previous administration, its status as an inherited liability qualifies it for premium attention by the present administration. However, that was not the case. Rather the present administration subjected the matter to complacence and in the process allowed avoidable delays in its resolution. As a result, interest payments mounted and forex rate changes added to bring the amount to its present humongous level.

Government’s agreement with marketers should have provided for fluctuation in prices, interest payments and forex rate fluctuations, all of which are unavoidable in our kind of situation when debt goes unpaid for such a long time. The present crisis of indebtedness to marketers is also the high price the country is paying for government’s reluctance to undertake full deregulation of the petroleum products market. Such a course of action is politically unpalatable to the government, but the Buhari Administration’s refusal to make a budgetary allocation for fuel subsidy compounded matters. Instead, it describes backhand subsidy payments as “under recovery” when NNPC imports all the country’s refined fuel needs and sells it below the cost price.

The government is having serious fiscal difficulty in clearing these accumulated debts, which will also continue to pile up with time. Soon after the upcoming elections, the government might have to sit down and examine the option of full deregulation of the petroleum products market.

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