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Economy

Mass Sack Looms in Oil Industry over N720b Debt

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oil marketers

By Guardian

Except the Federal Government pays all petroleum subsidy arrears of over $2 billion (N720 billion) owed oil marketers, many employees in the downstream sector may soon be thrown into the labour market.

Already, the oil marketers have disclosed plans to embark on mass retrenchment of workers as government fails to pay the outstanding subsidy owed on the importation of petroleum products, accrued interest on loans from banks and exchange rate differential.

The government’s delay in the payment of the over N720 billion debt has made marketers to halt the importation of petrol, leaving the Nigerian National Petroleum Corporation (NNPC) to become the sole importer of the essential commodity. The marketers said as a result of the non-payment of interest and foreign exchange differentials, they had gradually become financially handicapped to continue operating profitably.

Both the Ministry of Finance and the Petroleum Products Pricing and Regulatory Agency (PPPRA) could not be reached for comments last night. Text messages sent to the mobile phones of their spokesmen — Lanre Oladele (finance ministry) and Salisu Saleh of the PPPRA— did not elicit any response as at press time, even as several calls put to their phones rang out. But presidency sources had confirmed to The Guardian that efforts were being made to settle all outstanding issues in the sub-sector.

The marketers, who operate 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), added that government’s delay in settling all the debts was threatening massive investment in the downstream sector.

A statement by the marketers after their joint meeting in Lagos yesterday which was signed by their legal adviser, Patrick Etim Esq, revealed that many petrol sellers and oil companies are owing their workers over eight months’ salaries due to the inability of the Federal Government to pay the debt.

The marketers appealed for an urgent intervention of government by the authorisation to pay outstanding interest and foreign exchange differentials owed them to date to save their businesses from total collapse. They alleged that government violated the agreement reached with them on payment schedule.

They claimed that the commercial banks that lent money to them for the importation of petrol were still in despair following the weight of the indebtedness of the oil sellers, even as their operations nationwide were fast grinding to a halt. They said the hope that the outstanding subsidy would be paid following the intervention of the Vice President, Yemi Osinbajo, appeared to have been shattered as the payment promised to be effected in July 2017 was yet to materialise.

The statement reads in part: “This is devastating to marketers as we are being dragged daily by banks on debts owed and under threat of putting our tank farms under receivership.

“The condition of the contract is that the government shall pay the difference between the landing cost and the selling price of petrol (as fixed by government) provided that the landing cost is higher than the selling price.

“The government approved the landing cost which fluctuated as it depended mainly on the international price of petrol and exchange rate of naira/dollar. A key term of the government’s contract with marketers is that the under-recovery payments shall be paid to marketers within 45 days of submission of documents evidencing discharge of petrol cargo and trucking out from storage.”

According to the marketers, it was also agreed that after 45 days, the government should pay the interest charges on the loans taken to finance the importation of petrol.

Explaining their ordeal, the marketers said they opened letters of credit at the approximate exchange rate of N197/$1.00 while petrol cargoes were supplied and sold at the selling prices approved by government and the repayment was calculated using the above exchange rate.

The marketers stated that it was only in the first quarter of 2017 that the banks were able to liquidate the letters of credit from 2014/ 2015 at N360/$ as against the N176-195/$ at the time the LC’s were opened because of lack of foreign exchange from the government, leaving their accounts with the huge differential.

“The recent further devaluation of the naira from N195 to N305, and later to over N365 to US$1, while the Federal Government agencies based their reimbursement calculation on N197 to $1, left petroleum marketers within our association with additional debt burden in excess of N600 billion. This is in addition to the over N250 billion arrears owed.

“The downstream sector as a whole, is now saddled with a debt burden of over N850 billion which keeps rising because the banks are still charging interests until the total debt is fully liquidated,’’ the marketers claimed.

On the implication, they said the operations of the marketers had been halted with a backlog of staff salaries remaining unpaid for about eight months now.

But the other stakeholders called for dialogue, emphasising the need for the government to provide incentives and create an enabling environment for the establishment of private refineries.

The Chairman, Lagos Chamber of Commerce and Industry (LCCI) Petroleum Downstream Group, Ken Abazie, described the planned retrenchment by oil marketers as a normal business decision in a challenging environment.

He said that the oil marketers were in business to make profit and therefore may be forced to retrench if there were no returns on investment.

According to Abazie, “if you are no more making money, I wonder why you should still be keeping employees in the company. The current fixed price of N145 a litre for petrol is not profitable for marketers. If we are not importing, automatically, we are not in business and if we are not in business, there is no need to keep the workforce. This is the current challenge for every investor in the downstream sector.”

He said that businesses were crumbling, as NNPC became the sole importer of petroleum products in the country.

To Abazie, the funds the government is using for the importation of petroleum products should be directed to capital projects.

The Executive Secretary of the association, Obafemi Olawore, urged the Federal Government to pay the outstanding debts of $2 billion owed on the importation of petrol products and the accrued interests on bank loans.

According to him, the delay in the repayment of the loan debts owed the banks by marketers has led to the retrenchment in the banking and the oil and gas sectors.

“The debts have impacted grossly on marketers. Only a very few are presently importing insignificant quantity of petroleum products into the country,’’ he said.

Olawore said that the plea was to avert the scarcity of petroleum products in the country.

According to him, the inability of the marketers to import fuel has impacted negatively on loading activities at the Apapa and Dockyard private depots in Lagos.

Head, Programmes and Membership, Institute of Directors’ Centre for Corporate Governance, Nerus Ekezie, said that government should verify and pay all the subsidy arrears.

He said that the impact the retrenchment would have on the economy would be too much for the country to handle, especially during this period of economic recession.

Ekezie pleaded with the oil marketers to exercise patience and engage in a dialogue with the Federal Government in respect to the settlement of the subsidy arrears.

He stressed the need for the Federal Government to find a lasting solution to the issues of fuel subsidy arrears.

He said that government should encourage the establishment of private refiners through the provision of incentives to bring a lasting solution to the issue of petroleum imports. “Government should pay what it is owes the oil marketers and fully deregulate the downstream sector.,” he added.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

Economy

Unlisted Securities Market Gets 0.34% Boost Thursday

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Unlisted Securities Market

By Adedapo Adesanya

Amid an increase in trading value and volume, the NASD Over-the-Counter (OTC) Securities Exchange ended in the positive territory on Thursday, January 26, as it shot up by 0.34 per cent.

This was buoyed by the increase in the share price of Central Securities Clearing Systems (CSCS) Plc by 50 Kobo to N13.00 per unit from N12.50 per unit, and the surge in the price of FrieslandCampina Wamco Nigeria Plc by 30 Kobo to N62.48 per unit from the preceding session’s N62.18 per unit.

This jerked the total value of the unlisted securities market by N3.09 billion to close at N923.76 billion versus N920.67 billion of the previous day, as the NASD Unlisted Securities Index (NSI) increased by 2.36 points to settle at 703.01 points, in contrast to the midweek’s 700.66 points.

During the session, market participants executed eight deals at the bourse, 68 per cent lower than the 25 deals executed a day earlier.

However, the value of transactions increased during the session by 41.3 per cent to N4.9 million from N3.5 million, and the volume of trades jumped by 52.4 per cent to 189,670 units from the 121,494 units published on Wednesday.

At the close of business, Geo-Fluids Plc remained the most traded stock by volume on a year-to-date basis, with the sale of 61.1 million units worth N49.2 million. UBN Property Plc stood in second place with 29.7 million units valued at N21.1 million, while NASD Plc was in third place with 944,112 units valued at N13.6 million.

Also, VFD Group Plc maintained its position as the most active stock by value on a year-to-date basis, with 422,074 units sold for N103.0 million, FrieslandCampina WAMCO Group Plc was in second place with 899,657 units valued at N59.1 million, while Geo-Fluids Plc was in third place for trading 61.1 million units for N49.2 million.

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Economy

Naira Crashes at Parallel Market, Gains at Official Market

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Parallel Market

By Adedapo Adesanya

The Naira crashed against the United States Dollar at the parallel market on Thursday by N4 or 0.54 per cent to trade at N752/$1, in contrast to Wednesday’s rate of N748/$1.

However, in the official market, which is the Investors and Exporters (I&E) window, the Nigerian currency appreciated against the greenback yesterday by 45 Kobo or 0.1 per cent to quote at N461.25/$1 compared with the previous day’s value of N461.70/$1.

A 58.9 per cent or $64.66 million decrease in the value of forex turnover in the spot market helped the local currency close stronger during the session. Data from FMDQ Securities Exchange showed that FX trades worth $45.16 million were carried out compared with the $109.82 million executed in the previous trading day.

Also, in the Peer-2-Peer (P2P) segment of the FX market, the domestic currency gained N2 against the American Dollar to sell at N764/$1 versus Wednesday’s N766/$1.

However, in the interbank segment, the Naira lost 24 Kobo against the British Pound Sterling to close at N567.21/£1 compared with the previous N567.45/£1, and depreciated by 20 Kobo against the Euro to quote at N500.73/€1, in contrast to N500.53/€1.

Meanwhile, most of the tokens monitored by Business Post in the crypto market depreciated in value at the close of transactions on Thursday, with Litecoin (LTC) shedding 1.6 per cent to trade at $87.48.

Further, Ripple (XRP) depreciated by 1.4 per cent to sell at $0.4109, Binance Coin (BNB) lost 0.4 per cent to quote at $305.07, Dogecoin (DOGE) dropped 0.2 per cent to finish at $0.0862, and Bitcoin (BTC) declined by 0.01 per cent to sell at $23,044.70.

Conversely, Cardano (ADA) appreciated yesterday by 2.8 per cent to settle at $0.3808, Ethereum (ETH) rose by 0.6 per cent to sell at $1,604.89, and Solana added a 0.02 per cent to its value to close at $24.36.

but the prices of the US Dollar Tether (USDT) and Binance USD (BUSD) remained unchanged at the close of trades at $1.00, respectively.

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Economy

Stock Market Rebounds by 0.29% as GTCO, Others Enjoy Patronage

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stock market bull

By Dipo Olowookere

A 0.29 per cent growth was recorded by the Nigerian Exchange (NGX) Limited on Thursday on the back of renewed demand for stocks after the Central Bank of Nigeria (CBN) aggressively cut down the stop rate of treasury bills on Wednesday.

The disappointment resulted in investors looking for alternative investment instruments, and equities were the next point of call.

In the previous two trading sessions, the stock market was down, but it rebounded yesterday on the back of a fresh bargain-hunting, which consequently pushed the All-Share Index (ASI) higher by 153.31 points to 52,752.96 points from 52,599.65 points, and the market capitalisation increased by N83 billion to N28.733 trillion from N28.650 trillion.

According to data from the NGX, the banking and energy sectors appreciated by 1.58 per cent each, the insurance space rose by 1.01 per cent, and the consumer goods counter grew by 0.05 per cent, while the industrial goods index depreciated by 0.01 per cent.

During the session, investors traded 139.7 million shares worth N2.0 billion in 3,549 deals compared with the 119.8 million shares valued at N2.7 billion traded in 3,552 deals, indicating an increase in the trading volume by 16.61 per cent, a decline in the trading value by 25.93 per cent, and a drop in the number of deals by 0.08 per cent.

GTCO emerged as the most traded equity yesterday with the sale of 17.8 million units, followed by Access Holdings, which transacted 15.4 million units. Fidelity Bank exchanged 11.9 million shares, Mutual Benefits sold 6.9 million equities, and Dangote Sugar traded 6.7 million stocks.

The market breadth was positive on Thursday, with 25 price gainers and seven price losers, indicating a very strong investor sentiment.

Geregu Power gained 10.00 per cent to trade at N147.40, Coronation Insurance appreciated by 9.76 per cent to 45 Kobo, Chellarams improved by 9.70 per cent to N1.81, International Energy Insurance grew by 9.43 per cent to 58 Kobo, and Tripple Gee jumped by 9.09 per cent to 96 Kobo.

On the flip side, RT Briscoe lost 9.09 per cent to settle at 30 Kobo, Royal Exchange dropped 8.24 per cent to sell at 78 Kobo, Courteville depreciated by 7.84 per cent to 47 Kobo, Linkage Assurance fell by 4.00 per cent to 48 Kobo, and Transcorp shed 0.82 per cent to N1.21.

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