Government, oil marketers and debt bomb
When will the government and its agencies be declared promise keeping indeed when it comes to transactions between them and other stakeholders in the polity? Industrial actions are being daily declared, suspended and called off on account of only one issue: integrity deficit on promise keeping on all fronts. This question on covenant keeping came to the fore again the other day over promised debt payment on fuel subsidy to oil marketers, an issue most citizens thought had been long settled.
This integrity issue should not be in our character as a nation. It was widely reported the other day that the Vice President, Prof. Yemi Osinbajo, had intervened to facilitate the Federal Government’s settlement of its debt to oil marketers effective July 2017. Following that intervention, the Minister of Finance, Mrs. Kemi Adeosun subsequently raised a glimmer of hope of settling some verified debts amounting to N2.7 trillion. That is why it is indeed curious that recently, the oil marketers were reported to have threatened to embark on mass employee lay-off because of government’s non-fulfillment of its promise.
What else to expect after the Vice President’s intervention and the assurance by the Ministry of Finance that N2.7 trillion would be paid? This should be a serious cause for concern that the payment is yet to be effected, a development that has triggered such a threat to stability in the sector. It is even worse that no explanation has been given for the non-payment.
The oil marketers, the primary burden bearers of government’s failure to settle the debts, had alerted the nation that if the situation subsisted longer, wholesale disengagement of their employees would be an open option for them to follow to save their businesses. This is alarming enough in a market that has been volatile.
It is important consumers and other stakeholders appreciate that, if the marketers carry out their threat, it will be an ill wind that will blow no one any good at this time. For emphasis, if nothing is done and the major marketers off-load their employees into the already saturated job market, the socio-economic implications will be quite grave.
That is why all stakeholders should call and prevail on the government to settle now its debts put at about USD 2.0 billion or N720 billion (including bank interests and exchange rate differentials) to the marketers.
Besides, government should be conscious of the enormous relief settlement of its huge debts will bring to the economy. Mrs. Adeosun acknowledged this when she confirmed that government’s payment of N2.7 trillion out of its debts would “significantly enhance liquidity in the critical sectors of the economy” and also “go a long way in stimulating economic activities.” With such knowledge, it is unclear why the government has failed to pay these debts to fast-track economic revival.
What is more, it is most likely that if the debts had been paid, the just reported growth of 0.55 per cent in the economy would have been much higher with greater positive impact too on the populace.
There are more negative implications for failing to keep the promise to marketers. For instance, banks that lent money to the marketers will continue to be over-burdened with business-constraining bad loans; customers’ deposits and the credit system will remain endangered as banks may become distressed. Besides, firms whose survival depends on the marketers and banks may not survive. And under the present economic environment, sacking of just one employee from a gainful work has more than a bad domino effect for a ‘truck-load’ of other dependents.
Beyond all these, given the reported claim that the government had contracted to settle its obligations to the marketers within 45 days otherwise it would bear accrued bank interests on funds borrowed by them (marketers) to import fuel, government should have known that non-payment will increase its liabilities as banks will continue to charge interests until such facilities are liquidated. It should have therefore, made financial and economic management sense for the government to have paid its debtors timely to avoid using scarce financial resources that could have been deployed for more meaningful purposes, for the servicing of interest charges.
On the issue of exchange rate differentials, the government and the marketers ought to have been fully aware of the market dynamics in the importation of goods. Except the government explicitly agreed to cater for exchange rate differentials (which will sign-post government as a bad risk manager), the marketers too should honourably take care of their risks.
Every artful international businessperson knows that foreign exchange risk exists. If the marketers did not hedge against such risk, they cannot drop the negative outcome of their ignorance on the laps of the government and indeed tax payers. And so if the exchange differentials had favoured them, would they have credited the value into government’s coffers? But given the dramatic and serious change in the exchange rate of the Naira to the Dollar, the government and the marketers should dialogue for a win-win solution. In this instance, it is the magnanimity of the government that can be pleaded for. Nevertheless, if the government agreed to bear such a risk, it should be bound by its undertaking.
All told, it will be in public interest that government resolves the debt challenge urgently to revamp the economy and prevent further pressures and frustrations on the citizens. If, for instance, the problem of fuel scarcity re-surfaces at the filling stations, it will aggravate intolerable and overwhelming socio-economic order. And a situation whereby the nation is gravitating towards the Nigerian National Petroleum Corporation (NNPC) being the sole importer of fuel into the country suggests that avoidable danger is being nursed. But the danger will manifest the day the Corporation is unable to meet its fuel supply requirements. At such a point, long queues will surface, man-hours will be lost, and an already agitated populace may unleash mayhem. These are preventable by empowering the marketers to join hands with NNPC to keep the fuel pumps flowing until local refining of crude oil becomes a sustainable reality.
Finally, the government had earlier indicated it would issue bonds to raise funds to pay its due debts. This option is urgent and should be properly implemented. There should be no fear that it could fuel excess liquidity in the economy. Certainly, the bonds option will avail the government a long enough time to re-order its finances before they (bonds) are mature for repayment. Mindful that the present bond rate is high, government should sequence the bonds in manners that their repayment when due will not become another source of embarrassment. And so the expectations of the people on this score should not be cut off. Government should be exemplary in keeping its promises to the people and institutions. That is what enhances trust being the building block of credibility.
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