Despite government’s offer to pay oil marketers about N236 billion on or before Friday, December 14, confusion and intrigues persisted at the weekend, with some of the marketers insisting on cash payment of N800 billion outstanding subsidy debt.
A meeting called last Thursday in Abuja by the Debt Management Office (DMO) to address issues raised in a letter by some marketers on December 2, ended in controversy.
The marketers had threatened to shut down fuel depots nationwide if the debt, owed mainly during the past administration, were not paid in full. Such a move could result in a fresh petrol crisis in the country despite assurances to the contrary by the state oil firm, NNPC.
At the end of the Thursday meeting, there were conflicting reports about the resolutions by participants.
The government, through a finance ministry statement, said the meeting agreed with the aggrieved marketers on “settlement terms” to ensure operations at all petroleum products depots and sales outlets continued uninterrupted till further notice.
But, on Saturday, a section of the oil marketers disputed the report, saying their ultimatum to shut down depots operations on Monday remained.
The Executive Secretary, Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Olufemi Adewole, said in a statement that the government’s offer during the meeting failed to meet the demands of its members.
“DAPPMAN reiterates there was no agreement reached, because offers by (the) government failed to meet the legitimate demands of the association, and we did not sign the purported document.
But, reacting to the DAPPMA statement, the Chief Operating Officer, Nigerian National Petroleum Corporation (NNPC) Downstream, Henry Ikem-Obih, on Saturday explained what was agreed at the meeting.
“We agreed that after the first tranche is paid, marketers will form a committee to work with (the) government on details of how the next tranche will be paid between 2019 and 2020,” Mr Ikem-Obih said.
Also, an official close to the presidency who is familiar with the fuel subsidy debt controversy, told PREMIUM TIMES how the N236bn government promised to pay the marketers was arrived at.
How Debt Accumulated
The official said during the fuel importation between 2013 and 2015, the DMO issued sovereign debt notes (SDN) to marketers for fuel subsidy claims based on the agreement with government through the Petroleum Products Pricing Regulatory Agency (PPPRA).
“Government has never paid cash to marketers for their subsidy claims, contrary to what the marketers are currently demanding,” he disclosed.
The official, who participated in last Thursday’s meeting, requested his name should not be disclosed, because he was not authorised to speak to journalists on the matter.
On how the payment process worked, the official said based on the claims submitted by marketers, the PPPRA after verification would issue sovereign debt statements (SDS) to DMO, which would also verify.
He said the PPPRA will also write to the finance minister seeking approval for the marketers’ verified claims for payment.
He said the finance minister would, in turn, send the approved claims to the DMO to issue the SDN, a financial instrument in the form of cheque or draft used for payment.
Computing marketers’ current claims
Prior to 2015, the official said apart from some outstanding subsidy claims by marketers for fuel imported in 2013 and 2014, there were accumulated bank interests due to delayed payments on subsidies.
Again, since the marketers paid for imported products using dollars, the exchange rate at the time was initially N165 to the dollar, and later about N197.
That means if the marketers had imported products at the prevailing exchange rate of N165 to the dollar at the time, their claims would be paid inclusive the differential between N197 and N165.
He said since the exchange rate has since jumped to the current N305 to the dollar, if a marketer imported products, the differential would be calculated based on the current exchange rate.
2017 Agreement On Outstanding Debt
To determine the government’s outstanding indebtedness to the marketers, the official said a reconciliation meeting was held with all marketers in the Office of the Chief of Staff to the President on July 10, 2017.
The meeting was attended by the Group Managing Director of the Nigerian National Petroleum Corporation, Central Bank of Nigeria governor, Accountant General of the Federation, Minister of Finance, Director General, Directorate of State Services, Director General of DMO, Executive Secretary of PPPRA and others.
On the marketers’ side was the Executive Secretary of DAPPMA, and his counterpart from the Major Oil Marketers Association of Nigeria (MOMAN) and the Independent Petroleum Marketers Association of Nigeria (IPMAN).
Prior to the meeting, all marketers were required to submit their outstanding claims up to June 30, 2017, for verification, as the bulk of the claims differed substantially from those PPPRA submitted.
At the end of the meeting, the official said, it was agreed with the marketers that before payment of the verified claims, the government would deduct unpaid taxes, and administrative charges due to the Petroleum Equalization Fund (PEF) and PPPRA.
The official said the marketers also agreed at the meeting that government would not pay cash since releasing such huge amount of cash into the economy would cause inflation in the economy.
Concerned with the sincerity of government about the agreement, the official said the marketers demanded a document to demonstrate the government’s commitment to pay the agreed debt.
“That was why, rather than the usual SDN to the marketers, government said it would give two-year tenored promissory notes as assurance it accepted the debt and promised to pay in future,” the official explained.
Following the “agreement” at the meeting, the official said the then finance minister, Kemi Adeosun, constituted the Presidential Initiative on Continuous Audit (PICA), a special audit committee headed by Mohammed Dikwa, then director of Funds in the Office of the Accountant General of the Federation.
He said verified subsidy claims by PICA were submitted to the Executive Council of the Federation (FEC), which reviewed before sending to the National Assembly in January for appropriation.
At the end of their review, the official said the National Assembly approved in the 2018 budget the payment of N348 billion to the marketers, an amount, he said, government cannot exceed, as it cannot pay more than what was approved in the budget.
According to the official, following the December 2 letter by DAPPMA threatening to shut down all fuel depots across the country within seven-days if cash was not paid to marketers, the DMO convened last Thursday’s meeting to resolve the issues.
During the discussion, the official said government agreed to pay the marketers N236 billion out of the N348 billion approved by the National Assembly in the budget, latest by Friday, December 14, after deducting their outstanding liabilities.
“The only request the meeting made to the marketers was for them to wait for the relevant government agencies to write to the President, who was then in Poland for the Climate Change meeting, to seek his approval to pay the agreed amount based on the outcome of the July 10, 2017 meeting,” the official said.
He said other resolutions at the meeting was the need to carry out a review in January before paying the balance, in view of the adjustments by the National Assembly in the initial claims submitted to them.
He said all the marketers’ groups at the meeting agreed to sign the communique, except DAPPMA, whose representative asked for a brief time to consult its members.
He said moments later, the Executive Secretary of DAPPMA came back to say that the consensus by members of the group was that the offer by the government not acceptable.
“The truth is that no fresh offer was made to any marketer outside what was generally agreed since 2017 at the reconciliation meeting. The only of disagreement is where the marketers are adding interest on the foreign exchange rate differentials, which was already capped based on the exchange rate that prevailed at the time the importation was undertaken.
“Calculating the interest rate differential based on the current N305 exchange rate when the importation was undertaken when the exchange rate was between N165 and N197 is wrong,” the official explained.