…Banks threaten to take over marketers’ assets and tank farms to recover its huge debts
Total collapse of the petroleum downstream sector is imminent as the leadership of both Petroleum and Natural Gas Workers Senior Staff Association (PENGASAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) have concluded arrangements to embark on indefinite strike action due to the backlog of salaries owed their members by oil marketers following the inability of Federal Government to settle the lingering accumulated debts of over N800 billion owed downstream oil marketers to date.
The unions said that the strike action has become absolutely necessary following the continuous deteriorating welfare of its members working in the petroleum product downstream sector.
According to them, our members working with oil companies had not been paid salaries for up to 9- months by marketers due to inability of government to redeemed its commitment to pay in spite of the intervention of the Vice President, Professor Yemi Osinbajo and the directive given to the Minister of Finance to effect payment on or before the end of July 2017..
The notice of the indefinite strike action by the Labour Unions in the Oil and Gas sector has been received by the Marketers who are the employers. This is contained in a joint communiqué issued by the marketers after their joint National Executive Council (NEC) meeting held in Lagos, signed by the marketers legal adviser, Patrick Etim Esq and made available to journalists.
The marketers under the aegis of Major Oil Marketers Association of Nigeria (MOMAN) Independent Petroleum Marketers Association of Nigeria (IPMAN), Depot and Petroleum Products Marketers Association (DAPPMA) and Independent Petroleum Products Importers (IPPIs)
Etim said that the unions in their summation stated that in the last six months, they have been inundated by officials of our various Labour units operating in Tank Farms and Depots across the country that most Petroleum Product Importers and marketing companies are owing our members backlog of salaries now up to 9-months.
The union, NUPENG and PENGASAN claimed that the children of their members have been sent packing from school as the parents have not received salaries to be in a position to pay school fees for their wards, while their members are systematically being sacked by their employers.
According to the unions, the most disturbing aspect of this is that many members are now redundant as their employers are not able to operate their bank account for their operations with a potential massive job losses of our members in the oil and gas sector and other workers in the banking sector due to the growing size of this non-performing loan extended to oil marketers with a catastrophic banking system collapse looming in the country.
Etim said that this is will definitely puncture any growth gains made in the economy so far considering that the sector will completely fail in its critical role of driving economic progress resulting in huge job losses directly and indirectly.
He said that it is factual that currently many of the oil marketing companies are owing backlog of salaries up to 9-months in arrears while some marketers have started retrenchment of workers as a result.
He said that the leadership of the both unions said that due to inability of government to pay marketers outstanding debt of over N 800 billion, most of the marketers are planning another round of massive retrenchment of staff which are primarily PENGASSAN AND NUPENG members. He noted that the businesses of these marketers are gradually grinding to a halt due to the debts owed them by the federal government and the classification of their operating accounts by the banks crippling the ability of the marketers to trade since the first quarter of the year.
According to marketers, most banks are planning to take over our tank farms and business empires due to inability to pay back money borrowed to import products that were still pending unpaid by government.
The marketers said that petroleum marketers, as a result of these unpaid interest and foreign exchange differentials have gradually become insolvent and financially handicapped to continue operating profitably.
“There is a need for President Muhammadu Buhari’s government to keep improving governance especially by correcting wrongs of previous governments and making government responsible to its contracts and responsibilities.
“For the banks, their action is to see how they can avert another round of banking system failure that could be triggered by this huge outstanding non-performing debt owed the banks by oil marketers who cannot pay because the government is yet to pay them outstanding indebtedness.
“Federal Government in June 2017 concluded reconciliations with the marketers and PPPRA and made a commitment to pay before the end of July 2017. This was following the intervention of the Vice President (who was Acting President at that time).
“The reconciliation team was led by the Chief of Staff to the President and the Honorable Minister of Finance Minister.
“Further to the reconciliation, it was gathered that the Federal Executive council had approved the payment however the payment framework was said to have been sent to the National Assembly for approval and up till now there has been no feedback.
“We gathered from reliable source that the National Assembly claimed that they are yet to receive any of such requests from the Finance Minister,’’ he said.
The marketers said that the first source of the N800 billion debt is the non-payment of the balance of over N300 billion under-recoveries under the PPPRA importation template owed the marketers which has been reconciled and audited since 2015 and was provided for in the 2015 supplementary budget as well as the 2016 budgets.
He said that investigations revealed that only about 20 per cent of the amount provided for in the budget was actually paid the marketers in August 2016 with a promise to pay the balance within 3 months but till date nothing further has been paid despite repeated promises from the government.
They said that the second source of the N800 billion debt is the failure of the government and the central bank of Nigeria to provide foreign exchange to banks in Nigeria that financed the importation of the petroleum product particularly premium motor spirit PMS in 2015 by Marketers on behalf of the Nigerian government.
The marketers said that the banks used their dollar confirmation credit lines with foreign banks to open the Letters of Credit at exchange rates between N168/$ to N198/$ according to the approved PPPRA template as at the date of each importhey said that when the Letters of credits became due, the Nigerian banks defaulted in their obligations because the central bank did not provide the dollars.
The marketers said that these defaults by Nigerian banks on account of the petroleum products imported by the marketers for the government led many foreign banks to withdraw their dollar confirmation lines to the Nigerian banks and started insisting on dollar cash for Letters of credit from Nigeria.
“ A practice which represents a major disclaimer on the credibility of LC’s from Nigeria, the only place where this is obtainable.
“It was further revealed that following this development, the Central Bank then did the so-called intervention by providing dollars to local banks for the payment of past due letters of credit to their foreign creditor banks.
“For reasons best known to the Central Bank and the government , they provided the dollars for these letters of credit at rates between N285/$ to N320/$ as against the N168 $ to N198/$ that was the government approved template for the LC’s.
“This resulted into an additional N500 billion in debt, this debit balance the banks quickly passed into the account of the marketers instead of asking the central bank to take responsibility.
“From investigation, the previously unpaid N300 Billion and this outstanding debt of arising from the above stated circumstances has added up to N800 billion and is rising by the day as the banks are charging interest at 29 per cent per annum into the account of the marketers.
“The effect of this is that every day total interest payable is over N635million translating to over N19 billion in monthly interest or over N232 billion annually.
“All this according to the contract between the PPPRA and the marketers, the government will pay all interest and exchange rate differential.
“From our investigation, the increasing debt is a creation of the agencies of government and it will continue to grow like a monster eating up the stability of our financial system if it is not resolved immediately otherwise it will lead to the total collapse of the financial services sector.
Stakeholders viewed that as a matter of urgency, the government should immediately pay all the reconciled outstanding debts to marketers without further delay as the negative impact is growing wider by the day and the petroleum marketing sector and its workers are heading towards a catastrophic collapse.