A PETROL SCARCITY FORETOLD

activities.”

She further urged her to approve all costs of importation (interest charges and foreign exchange differential) arising from delay in payment of subsidy outside the extant 45-day payment cycle. Finance Minister’s Position Okonjo-Iweala had responded promptly to the Petroleum Minister’s letter with an assurance that the federal government was committed to continue to pay all verified subsidy claims to the marketers.

She also assured the marketers that the government was then awaiting the report of the committee set up by her ministry and the oil marketers to verify the additional claims arising from accumulated interest on delayed payment and foreign exchange rate differentials.

The Finance Minister had told THISDAY that though the government was indebted to the marketers, the marketers were also being paid varying amount, which had been published.

She also admitted receiving a letter from the petroleum minister, requesting her to pay the marketers their outstanding claims, adding that she responded appropriately to the letter.

On the issue of the accumulated interest and foreign exchange rates differential arising from the delay in payment of subsidy claims, the minister stated that her ministry and the oil marketers had met in Lagos and agreed to review the claims due to the marketers.

She confirmed that at the meeting, which she personally attended, a committee was set up between her ministry and the marketers to carry out the review.

“On the letter, yes, there was letter to which I responded. We have set up a committee between the ministry of Finance and the oil marketers to agree on the interest rate and exchange rate differentials.

In the meeting, we agreed to do the review together. We decided that we will review it in such a way that it will be fair to the ministry of finance and the marketers to arrive at a balanced position,” she said.

Speaking further on the issue of subsidy, the minister stated that her ministry had agreed that it would pay a part of the claims every month to reduce the balance.

She, however, stressed that against the backdrop of the falling crude oil prices at the international market, the ministry of Finance cannot manufacture money as the federal government depended on oil revenue and non-oil revenue.

“So, it is not that the Ministry of Finance has refused to pay anyone. We are committed to paying whilst we wait for the outcome of the report of the committee that is reviewing outstanding payments on exchange rate differentials and interest rate,” she added.

Special Adviser to the CME on Media, Mr. Paul Nwabuikwu, had also said in a statement that N336 billion was paid to the marketers from December 2013 to September 2014.

This figure includes N7.7 billion arrears owed five marketers that were not referred to the Special Fraud Unit for further investigation for alleged subsidy fraud.

Nwabuikwu acknowledged that the payment processes was very rigorous but added that it was in line with the wishes of Nigerians for transparency and accountability in the management of the subsidy regime.

“That is why we publish the details of amounts paid along with the names of marketers whenever payments are made. The marketers are, of course, are very important in this process.

That is why the Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, met with them some weeks ago to discuss their concerns about delays in payments.

At the meeting, the minister in her characteristic forthright manner, explained the revenue constraints facing the country and reassured them that government will continue prioritise and make payments as funds are available,” he explained. Latest petrol scarcity Though the country escaped fuel queues by the whiskers at the end of 2014, the tightness in supply snowballed into full crisis recently as all the private marketers stopped importation and relied on the NNPC for supply.

By the time Okonjo-Iweala met with the marketers in Lagos and promised to conclude the payment of the N264 billion outstanding claims by the end of March, it was too late the correct the distortion in supply..

Executive Secretary of Major Oil Marketers Association of Nigeria (MOMAN), Mr. Obafemi Olawore, had confirmed to journalists that with the minister’s assurance, the marketers would play their own part to ensure that any form of scarcity of products at this period was averted but it was a forlon hope as queues were already building up.

“We have outstanding subsidy and outstanding foreign exchange and interest. You recall that last year, the federal government, through the Ministry of Finance paid us about N345 billion, which was mainly for 2013 and part of 2014.

However, we still have some outstanding claims for 2014 and early part of 2015. The total invoices already sent and processed are about N164 billion on subsidy. On foreign exchange and interest combined, the total amount is around N100 billion now,” Olawore said.

He confirmed that Okonjo-Iweala met with the marketers, where she gave them a schedule of payment, which was acceptable to the marketers.

“This means that we believe her and we may only have cause not to believe her if at the end of March, nothing happens.

But we believe her. So, the product supply that was actually going to go down will have to pick up, which means that we need to assure ourselves that even if we notice any tightness in product supply anywhere, for the sake of Monday meeting, it is a temporary tightness. Therefore, there will be products,” he added.

Olawore said the minister also promised to pay interest on subsidy claims that are delayed beyond the 45 days stipulated in the Petroleum Support Fund (PSF) guidelines, but these belated assurances and promises could not stop the fuel crisis. How CBN policies fuel the petrol scarcity The marketers also blamed their woes on the recent devaluation of the naira, which made it impossible for them and other Nigerians to enjoy the relief arising from the drop in the international price of crude oil.

According to Olawore, as the international price of crude oil was dropping, the value of the naira was also declining, thereby hiking the price of products.

“For example, petrol the exchange rate for bringing products before the devaluation was N171.36 per dollar. At that rate, the landing cost of petrol was N90.67 per litre.

There was a time the exchange rate rose to N188, that is, N188 was the interbank rate, while the Central Bank of Nigeria (CBN) gave us N171.36.

But when it went to N188, the landing cost of petrol rose from N90.67 to N98.36. As at today when the exchange rate has gone to N199 (there is no window again), the landing cost rose to N103.45. So, you see that the main factor here is the exchange rate. If it moves to N215 per dollar, the landing cost will move to N110.84,” he explained.

Olawore said once the exchange rate moved, especially the way it moved by N10, N20, N30, it would erode the gains the marketers and Nigerians would have derived from the fall in the price of crude oil if the rate had been retained at N171.36.

Indeed, two recent directives of the apex bank were said to have fueled the crisis in petrol supply.

One of the directives, according to the marketers, was issued around the end of December 2014, where the CBN directed the banks to reduce their transactions with oil companies to curb the challenges of meeting the huge funding demand of these companies and also address other liquidity issues.

The CBN’s directive, it was learnt, stemmed from the result of an earlier risk-based supervision exercise carried out by the apex bank, which revealed a huge financial exposure of the banks to the oil and gas sector.

The apex bank was said to be concerned about some risk management deficiencies, and was determined to take necessary steps to ensure that banks have sufficient capital buffers to mitigate escalating risk-taking activities.

The second directive of the apex bank was the recent closure of the retail Dutch Auction System/wholesale Dutch Auction System (rDAS/wDAS) segment of the foreign exchange market.

With the closure and the quoting of an exchange rate of N198 per dollar, the marketers said the CBN’s action was an indirect devaluation of the Naira at the interbank forex market.

As a follow-up measure to stop naira speculation, the CBN also banned commercial banks from re-selling CBN dollars to other banks.

Under this measure, the apex bank scrapped its window of direct sale of foreign exchange to end users, and directed that all foreign exchange needs should be sourced from the interbank market, with rate ranging between N197 and N198 per dollar.

According to the marketers, the CBN’s actions prompted them to take precautionary measures by relying on inadequate supply from the Pipeline Products Marketing Company (PPMC).