Beyond settling marketers’ debt, what are we doing about local refineries?
If the latest alarm by marketers over a lingering $1billion debt is any measure, it is that the ghost of fuel subsidy, which for years drew the nation to the edge, is neither dead nor buried. Last week, this newspaper reported the Independent Petroleum Products Importers (IPPIs) as raising alarm over its members’ huge indebtedness to banks as a result of the Federal Government’s failure to pay them for fuel imported into the country. Aside hampering their ability to further bring in products, the marketers say that the huge indebtedness “is threatening the operations of the affected banks and the nation’s financial industry”.
The marketers’ story is certainly a familiar one. They were, under the Jonathan administration, given the mandate to import and supply petrol to the market with a guarantee that the Federal Government would refund the difference between the landing cost and the selling price of petrol. As the marketers pointed out in their communique last week: ”A key term of the government’s contract with IPPIs is that the subsidy payments shall be paid to IPPIs within 45days of discharge of petrol cargo. It was also agreed that after 45 days, the government shall pay the interest charges on the loans taken by the IPPIs to finance the importation of cargoes of petrol”. These liabilities for which many of the Letters of Credit were established since 2014 currently stands at $1billion, to which N160billion is said to have accrued in interest.
If we are any alarmed that the issue of the debts have been allowed to drag for so long in apparent breach of the mutual understanding between the parties, more frightening is that the same government pretends to be oblivious of the grave implications of the huge potentially non-performing assets on the balance sheets of the lending banks. The Central Bank of Nigeria (CBN) sounded the alarm on the surge in non-performing loans mid last year: “The industry ratio of non-performing loans net of provision to capital increased significantly to 30.9 per cent at end-June 2016 from 5.9 per cent at end-December 2015, depicting weak capacity of the sector to withstand the adverse impact of non-performing loans”. Interestingly, the surge was attributed to loans made out to fuel importers.
The question is: how does the Federal Government expect these marketers to liquidate their loans in the face of such dereliction on its part? Does it bother it that the development can imperil the banking industry as a whole? How does this bode well for the efforts to stabilise product supply? It is hard to imagine that this is happening at a time the government claims to be seeking active partnership of the marketers to guarantee uninterrupted flow of products.
We urge the government to act swiftly to put an end to the matter and save the financial services industry. Except the government has reasons to doubt their claims, it should settle all verified claims promptly.
We cannot but raise question about the status of the initiatives being undertaken by the government to reduce the quantum of fuel imports which is at the heart of the crisis. Presently, the price of household Kerosene has hit the roof; ditto aviation fuel whose shortage currently threatens to cripple aviation services. To the extent that all of these derive from the current regime of importation, Nigerians have long said that they cannot wait to see the cycle come to an end.
But the Federal Government, unfortunately, has not been forthcoming with measures to address the problems. What about the much-advertised collaboration with International Oil Companies on co-location of refineries? Is the government still pursuing that route? What exactly is the current state of the four refineries and the plans to hand them over to private entities for management? To the extent that the government has not been forthright on these initiatives, the impression is being created of a government lulled to sleep in expectation of the coming of the planned 650,000 barrels per day Dangote Refineries and Petrochemicals Complex. That cannot be right. Surely, Nigerians deserve to be let into the specific details of what the government is doing as well as the timelines in the short, medium and the long term, to take the country out of the fuel-import dependence cycle.
