Averting Potential Threats to Fuel Supply

ENERGY ANALYSIS 

The recent strike by the Petrol Tanker Drivers should be a lesson for the federal government to address all issues that could potentially threaten the fuel supply chain, including the settlement of the outstanding $1.1 billion mature Letters of Credit to marketers. Ejiofor Alike reports

The chronic challenges, which have over the years, led to scarcity of petroleum products in the country manifested recently in a one-day strike embarked upon by the Petroleum Tankers Drivers (PTD) section of the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG).
PTD’s action could have plunged the country into another avoidable fuel crisis but for the swift intervention of the Minister of State for Petroleum, Dr. Ibe Kachikwu and the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru.

However, going by experience, the drivers will renew their agitations in the months ahead to press on with their demands as the duo’s intervention only led to an increment of the bridging claims paid to the tanker owners – National Association of Road Transport Owners (NARTO), thus partially meeting only one of the numerous demands of the drivers.

NUPENG had in their communique at the end of its recent Central Working Committee (CWC) meeting held at the union’s secretariat in Yaba, Lagos, drawn the attention of the federal government to some unresolved issues bordering on the welfare of workers, such as bad roads, poor remuneration, insecurity, non-passage of PIB to commercial the NNPC and the alleged excesses of some security agencies.
However, the pressing issues in the communiqué were the issues of bad roads, drivers’ salaries, and extortion of drivers on the highways by security agents.

South West Zonal Chairman of NUPENG, Alhaji Tokunbo Korodo, in a telephone conversation with THISDAY, identified poor remuneration, insecurity and bad roads as the major issues that fueled the agitation by the drivers.

“The tanker drivers have been appealing to NARTO for salary increment but NARTO refused. NARTO’s position is they can’t increase the drivers’ salaries because the costs of spare parts have increased and the government has not increased their bridging claims. Apart from the issue of drivers’ welfare, most of the roads they ply are bad and this has resulted in accidents or damaging their trucks. Tanker drivers die every day due to bad roads and we want government to address the issue. The harassment of drivers by security agents, especially officials of Nigeria Security and Civil Defence Corps is also unacceptable,” Korodo explained.

“The officials claim they are looking for stolen or adulterated products. They ask drivers for samples of their products and when the drivers cannot provide the samples because the products are sealed, they force them to break the seal,” he said.
“Most of these drivers are harassed by these officers, at times the tanker and the driver will be detained for close to a month,’’ he said.
Korodo further disclosed that the union wants quick resolution of the dispute between the NNPC and Capital Oil and Gas Limited.

According to him, the jobs of more than 2,000 staff of Capital Oil and Gas Limited are on the line due to their closure Capital Oil facility by the federal government.
“NNPC is saying that Capital Oil is indebted to it but Capital Oil has said that from its own records, the NNPC is indebted to it. We want government to intervene to ensure that they do proper reconciliation because it is affecting our members. We have over 2,000 tanker drivers in Capital Oil and they have been declared redundant since the dispute started. Having been declared redundant, the drivers might be issued sack letters and we don’t want that to happen. That is why we want government to resolve the matter,” Korodo explained.
According to him, the union wants the federal government to resolve the matter so that the staff and tanker drivers would resume duty.

Suspension of action
However, the tanker drivers suspended the strike, which lasted for only one day after the federal government had announced the immediate increment of the bridging claims payable to petroleum product marketers.
As part of moves to ensure uniform price of petrol across the country, bridging claims are paid to marketers for the transportation of petroleum products from the storage depots to retail outlets across Nigeria.

In his opening remarks at the meeting between NNPC and leaders of the PTD in Abuja, the Group Managing Director of NNPC, Dr. Maikanti Baru, said the allowance was raised from the current N6.20 per litre to N7.20 with immediate effect.
Though the drivers suspended the action following the increase in the bridging claims paid to their employers – NARTO, the government gesture failed to address the numerous demands of the drivers, including the issue of salaries, which the increment is supposed to resolve.

It is obvious that the paltry N1 increase in bridging claims cannot permanently take care of the huge entitlements of the drivers.
Also the demand by the drivers for the government to fix the bad roads, which claim the lives of drivers on the highways and the issue of extortion on the highways by security agents, will require the attention of the highest level of government as these issues cannot be handled by the NNPC or the Ministry of Petroleum.

Apart from the tanker drivers, motorists and other road users have also lost their lives when tankers carrying petroleum products exploded after plunging into pot holes and ramming into other vehicles on the high ways.
Feelers from officials of PTD indicate that unless these challenges are holistically addressed, the agitation by the drivers will resurface in the future, thus threatening the stability in fuel supply and distribution.

Outstanding subsidy claims
Apart from the issue of unpaid salaries, bad roads and extortion by security agents on the highways, which have led to constant protests by tanker drivers, another major issue that has the potential to threaten the current serenity in the supply of petroleum products in the country is the non-payment of the outstanding $1.1 billion subsidy claims incurred by marketers during the subsidy regime.

The marketers had repeatedly warned that unless the claims were paid, they could kill not only their businesses but also worsen the liquidity crisis in the banking sector with the attendant unsavoury implications for fuel supply nationwide.

In a recent communiqué issued at the end of one of their meetings in Lagos, the marketers, under the aegis of Independent Petroleum Products Importers (IPPIs), had argued that the outstanding debt was money borrowed from banks to fund importation during the subsidy regime.
The marketers contended the unpaid claims have accumulated an interest of N180 billion because of the failure of the federal government to pay the interest on the loans as agreed.

The marketers, comprising Major Oil Marketers of Nigeria (MOMAN), Independent Petroleum Marketers Association of Nigeria (IPMAN), and Depot and Petroleum Products Marketers Association (DAPPMA), said their inability to pay or service the loans, had not only stalled importation of fuel by the private marketers but is also threatening the operations of the affected banks and the country’s financial system.

“The CBN has also offered foreign exchange to IPPIs under a special window aimed at liquidating outstanding matured Letters of Credit at an exchange rate of N305. However, the exchange rate of N197 when Letters of Credit were initially opened for IPPIs and transactions concluded and the current CBN offer rate of N305 is an increase of 55 per cent and a significant rate differential,” the marketers explained.

They said: “This means that for every 15,000 metric tonnes of petrol imported by the IPPIs at a rate of $500 per MT and whose foreign exchange differential claims have not been paid then it means that the cargo of 15,000MT imported at the N197 rate will now be given foreign exchange at the rate of N305. By implication a cargo of 15,000MT at $500 per MT is S$7,500,000 or N1, 477,500,000 at N197 rate or N2, 287,500,000 at N305 rate. If these outstanding payments to IPPIs are made at N305 they would suffer a loss of N810, 000,000 per 15,000MT cargo of petrol. Government’s delay in paying debts to IPPIs and the difficulty they face in procuring forex at equitable rates will likely see the extinction of many of the IPPIs in 2017 thereby creating petroleum products shortages and attendant insecurity,” the marketers added.
The marketers said the problem of the banks was compounded by the fact that they provided billions of dollars to finance the importation of cargoes of petrol by IPPIs.

“They opened Letters of Credit at approximate exchange rate of N197 per dollar. Petrol cargoes were supplied and sold by the IPPIs at the selling prices approved and subsidised by government and the subsidy payments were calculated using the above exchange rate. Now at the beginning of 2017, the banks have not liquidated the Letters of Credit from 2014 because of lack of foreign exchange from the government. The outstanding matured Letters of Credit are currently over $1billion. The Nigerian banks involved and the entire Nigerian banking system is at risk on account of these transactions,” said the marketers.

The communiqué, which was signed by their Legal Adviser, Mr. Patrick Etim, had added that there was little evidence that the government had seen the risks in further delaying the payments under the subsidy scheme.

“The exposed situation of the banks is exacerbated by the current trends in the petrol market. When the fixed pump selling price of petrol was increased from N97 to N145 per litre in May 2016, it was based on an exchange rate of N285 resulting in a 45 per cent increase. On June 20, 2016 the Naira was devalued from N285 to N305, which is an increase of seven per cent but the fixed pump selling price of petrol has not been increased. This means that petrol must be subsidised,” the marketers reportedly added.

The communiqué added that the outstanding claims arose largely from importation of petroleum cargoes authorised by the administration of President Goodluck Jonathan’s government, stressing that since government is a continuum, the contracts of the President Jonathan’s government will remain binding on successive governments.
Since these claims have been verified by the present administration, it is important that the payment modalities be worked out to avert potential crisis.