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Fuel importers face fresh hurdles over $950m debt

By Roseline Okere
04 July 2016   |   2:44 am
Uncertainty is dogging in the supply of petroleum products for local consumption as some banks overseas have suspended short and medium-term credit lines to their Nigerian counterparts due to the inability of marketers...
Emma Iheanacho

Emma Iheanacho

Uncertainty is dogging in the supply of petroleum products for local consumption as some banks overseas have suspended short and medium-term credit lines to their Nigerian counterparts due to the inability of marketers to pay matured foreign currency obligations of over $950 million.

The Guardian learnt at the weekend that unless the Federal Government intervened in the payment of the money, marketers would have no choice but to continue to rely on the Nigerian National Petroleum Corporation (NNPC) for supply which they have always claimed to be inadequate.

This has led to fears that, should NNPC face any difficulties in fuel importation, the country may encounter another round of scarcity of petroleum products.

A marketer who spoke with The Guardian in confidence said a majority of them could not import petroleum products, as the banks are waiting for the foreign currency obligations to be cleared before giving another opportunity to marketers.

According to the source, the marketers are, therefore, left with no option than to depend heavily on NNPC.Speaking on the current challenges facing the downstream sector at a forum organised by the Lagos Chamber of Commerce (LCCI), Petroleum Downstream Group, the Chairman and Chief Executive Officer, Integrated Oil and Gas, Captain Emmanuel Iheanacho, said in spite of the various reform measures which have been suggested to achieve a more efficient petroleum products market structure, there was no escaping the fact that as things stood, nothing could work unless marketers had ready access to foreign exchange within a well-defined, well-organised market.

According to him, there can be no solution which is separable from the “need to urgently restructure the nation’s economy so that Nigeria can very rapidly become a net exporter of consumer goods rather that the forex guzzling net importer of goods that the country currently is.”

Iheanacho expressed reservations about the Petroleum Equalizing Fund (PEF) payments, which he described as unnecessary tax on trade that will ultimately be borne by the products’ consumers.

“As PEF payments are not chargeable against any particular logistic services rendered, they should be discontinued in the light of the need to minimize the market price of the products to which they relate,” he said.

He also stressed the need for the Pipelines and Products Marketing Company (PPMC) to reduce its involvement in the trade and to gear itself to intervene only occasionally with stabilising supply volumes.

“We observe that a government marketing agency may not be in a position to match the capacity of independent marketers in the logistics management, competitive cost and product pricing of products supplied to the Nigerian market.

The PPMC may well apply itself to working in close co-operation with the independent marketers to ensure the adequacy and regularity of product supplies to the market at the most competitive prices,” he said.

Iheanacho noted that the continued issuance of cargo allocation letters in a deregulated market seems somewhat odd, contradictory and illogical and that potential suppliers should be able to import cargoes at their discretion subject to compliance with cargo quality and safety guidelines as has been historically issued and enforced by the Department of Petroleum Resources (DPR).

Speaking also, the President of LCCI, Nike Akande, stated that the sustained decline in global oil prices since 2014 has put the nation in a difficult position and consequently led to various fiscal and economic challenges such as the drop in foreign earnings and reserves, financial bailout for many state governments and unstable business environment.

“There have been several discussions about reforms in this sector. The good news is that remarkable progress has been made with the recent pricing reforms. The state of the sector has a significant bearing on the economy because we need energy to power this economy. It could also be a major driver of economic diversification efforts,” she added.