• Friday, June 21, 2024
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FX scarcity, legacy debt unsettle downstream petroleum sector


Foreign exchange scarcity and legacy debts are unsettling the downstream sector with the possibility of fuel scarcity recurring in no distant time, BusinessDay investigations show.

Specifically, the legacy debts of oil marketers are occasioned by the new exchange rate of between N282-284/$ from the previous N199/$ which have ballooned to about N266 billion.

This is against the N190 billion that they were supposed to pay at the old rate of N199/$.

The implication is that delay in paying the debt, along with the foreign exchange liberalisation policy, have brought the difference of N76 billion.

A reliable source from the oil marketers told BusinessDay that government’s insistence that they use the current exchange rate to settle the legacy debts will mean that the marketers will have to look for the differential which is about N76 billion in order to liquidate the debt.

“These businesses were transacted almost two years ago and now, they want us to use the exchange rate of N282 to a dollar to clear these matured obligations that were transacted at the rate of N200. Government is asking us to bring the differentials to make up the difference. That will kill the downstream sector in Nigeria and meanwhile, the interest is piling up at the offshore banks”, the source said.

It is understood the 80 percent of that debt is from two international banks; BNP Paribas and Citibank.

Oil marketers said the NNPC is under-cutting the market   because of the price it is selling the product. It sells at N 111 for a product that is costing about N126-127 per litre. They said if they import and sell at about the price the NNPC is selling, they would run out of the markets.

Another reason the marketers gave for not importing is that the process of getting the forex is so slow and they are not getting the needed volume of forex that could have allowed them to import.  They said government should change the template for petrol so that they can sell under the regime of appropriate market forces.

Members of  the Depot and Petroleum Products Marketers Association (DAPPMA)  who spoke to BusinessDay, also  said  despite the  recent foreign exchange  policy,  they are  not disposed  to importing  fuel  because  they   would not be able to sell  even at  the  current  price  of  N145  Per litre.

The resultant effect is that Nigerians would  in no distant future would return to  filling stations queuing  for the commodity.

Already,  fuel supply  from  the Nigerian National Petroleum Corporation (NNPC)  to  marketers,  has become unsteady, as some  marketers get intermitent supply and days of dryness.

   The NNPC supplies the bulk of the fuel and some stake- holders are saying it cannot carry the burden for too long. The  corporation is alleged not  to be importing  enough  as evidenced in  its inability to supply   it  depots in Mosimi , Ilorin and  Ore.

  Other stakeholders informed BusinessDay that the NNPC stocks are not stable and it is beginning to make the market apprehensive, as many of  the filling stations outside Lagos and Abuja  operate one day on and about three days off, an indication that all  fuel scarcity has started creeping back gradually because it has stopped supplying products to its depots across the country.

According  Nojeem Korodo, chairman Lagos Zonal Council of the Nigeria Labour  Congress and Chairman of the National Union  of Petroleum and Natural Gas association (NUPENG) who explained why the supplies have been unstable in the larger part  of the country.

Korodo said the NNPC  has stopped supplying  products to  it  depots  in the hinter land  adding  that everyone is the dark as to what  is happening  to the depot.

He said  all  the supplies are diverted to private depots in Lagos  and because of this, many  other stakeholders  that  would  have ordinarily been encouraged  to  import, are not doing so  because the NNPC supplies their depots and has abandoned its own.

Attempts to get Garba Deen Muhammad, the group corporate affairs manager  of the  NNPC to comment on the matter have been unsuccessful as  he neither responds to calls nor replies to text messages.

Olusola  Bello & Frank Uzuegbunum