The current economic recession in the country appears to have taken its toll on indigenous players in the nation’s oil and gas industry as some of them have been selling off their assets to pay back loans taken from banks.
Their misfortune is compounded by the fact that some of the jobs gotten from the international oil companies, IOCs, have been put on hold, coupled with their inability to source foreign exchange in order to import materials.
Chief Executive Officer of an oil servicing company who prefers to be anonymous explained that the situation is excruciating for indigenous companies.
He said, “The service companies are challenged. They service the exploration and production companies, E&Ps. If the E&Ps are not working, what will they be servicing? How will they come to service? I have a contract service with Shell for one year to provide access for maintenance facilities for them, but we have not been called to provide any. No work is going on now. I borrowed money, acquired equipment, in fact I gave instruction that some of our assets can be sold to be able to pay our debts. I am a direct participant in that programme.
“The minimum we were expecting is to do $500,000 service based on that particular called off contract. Till date, they have not offered up to $80,000. Meanwhile our investment has been predicated on the fact that we are going to have $.5m services.
All the things we acquired, all the recruitments we did, all the trainings we sent people overseas to do (We sent people to Dubai, we certified them in scaffolding and security in the United Kingdom, preparing for this journey). We are going through excruciating moments. It is very bad.”
The CEO explained that the major challenge confronting independents in Nigeria are predicated on international market price.
According to him, “Some of them can produce but they cannot evacuate. They have taken facilities from multi-national organizations to fund their operations and doing that is predicated on cash flow from sales. When sales are interrupted, the cash flow will decline. The multi-nationals will come for their money. If you are to sell your assets to meet your financial obligations, remember you need to be a good corporate citizen to be able to attract fund tomorrow, it is critical.”
Another player in the industry, who was an executive member of the Independent Petroleum Marketers Association of Nigeria, IPMAN, said that in the last seven months, he has been forced to sell two off his assets worth millions of Naira to settle bank loans. He explained that the current recession has made life difficult for him as the exchange rate of N490 to a dollar means that he has limited access to foreign exchange to import petroleum products.
“For over seven months now, business has been difficult. It is difficult to the extent that one is unable to import petroleum products due to scarcity of foreign exchange. You are aware that a dollar exchanges for N490. We were told that the official rate is N315. I am yet to see anybody who gets it at that rate. Some of us are being put out of business. To be frank with you, I have sold two of my assets to offset bank loans. The situation is terrible, I must confess,” he said. – Vanguard.