December 16, 2008

Falling naira: Marketers seek revaluation of N62bn debts

Oil marketers are poised for a confrontation with the Petroleum Products Pricing Regulatory Agency over outstanding debts of N62bn on petroleum subsidy.

The marketers want the sum revalued based on the current exchange rate, as the products suppliers would have to be paid in dollars, and they would need more naira to purchase dollars.

With the current exchange rate, the marketers said the all the burden of the falling value of the naira would be borne by them alone, insisting that the PPPRA, managers of the Petroleum Support Fund, should pay interest on outstanding debts by way of revaluation.

However, PPPRA officials told our correspondent on the telephone that it was not feasible to revalue the debts, as the process for paying the outstanding sum had gone too far.

According to the Manager, Public Affairs, PPPRA, Mr. Yusuf Muazu, “It is not feasible for now because the issue now is to raise funds to pay the outstanding debts and the process has gone very far.”

He explained that for the agency to consider such an option, it would mean retrieving all the documents relating to the outstanding debts and re-computing the amount all over again before passing them for necessary approvals.

The marketers’ grouse is based on the fact that the outstanding sum was computed at N118 to $1, whereas the dollar is now above N130.

The noted that if they were paid based on the old rate, they would be unable to meet their liabilities to the suppliers, who would be paid in dollars.

Although the PPPRA based landing costs at N124.66 to $1 on the template posted on its website, industry sources hinted that the agency had agreed to review the exchange rate to N127 to $1.

But Muazu noted, “The PPPRA does not compute the exchange rate on its own, it works with the exchange rate provided by the CBN, and the new exchange rate will take effect when the CBN approves it.”

Besides, he stated that the marketers had not asked for debt revaluation, adding that the agency would not on its own initiate such a move.

Confirming the outstanding debts, the PPPRA said efforts to pay off the N62bn had gone very far such that “marketers would be paid any moment from now.”

Nonetheless, the marketers insist that even if the amount was not revalued, they should be paid interest on the sum, as this was the practice set by the Nigerian National Petroleum Corporation, which paid interests to contractors whenever it defaulted in payment.

While waiting to sort out the issues with the PPPRA, the marketers have asked for permission to purchase dollars directly from the Central Bank of Nigeria to enable them continue to import petroleum products and to avert possible scarcity.

The request is coming on the heels of the continued fall of the naira to the dollar at the money market.

Making the appeal on Monday in Lagos, the Executive Secretary, Major Oil Marketers Association of Nigeria, Mr. Obafemi Olawore, told journalists that this was the only way the marketers could sustain products supply in the system.

He said, “We (importers) are owing the suppliers and have to pay for the products in dollars, whereas we are being paid at an old rate of N118 to $1, who bears the burden of the difference between the old and the new exchange rates?

“That is why we are asking the PPPRA to pay us interest on the outstanding debts or do a revaluation of the amount owed.”

Speaking on the over N300m to be refunded by the marketers in view of the falling price of crude at the international oil market and the possibility of the PPPRA netting it off from the outstanding debts, Olawore said marketers were ready to pay back.

He said, “We are ready to pay back, but the PPPRA should calculate the interest on the over-due debts.”

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