N130.7bn debt shrinks investment in oil sector
.Major oil marketers suffer cash crunch
.MOMAN calls on FG to clear outstanding debt
By Udeme Clement
If the Federal Government does not pay the huge outstanding debt of over N130.7billion subsidy money owing Major Oil Marketers, as a matter of urgency, the economy may suffer another setback, as investment in the oil sector is declining by the day, due mainly to debt over-hang.
Financial Business inquest revealed that operations by Major Oil Marketers Association of Nigeria, MOMAN, comprising of Conoil, Forte Oil, MRS, Total and other companies, are shrinking with severe multiplier effect on the nation’s Gross Domestic Product, GDP. For instance, in the last quarter of 2018, oil sector contribution to GDP ratio dropped, even as it reflected on the marginal decrease in the nation’s foreign reserves.
Our investigation further revealed that the huge debt still outstanding for about four years now is taking its toll on Major Oil companies, as they are currently experiencing cash crunch, even as the financial sector is equally affected, since the money was borrowed from commercial banks.
Financial Business also learnt that commercial banks doing business in Nigeria are not willing to give MOMAM members credit facility any more for operations with huge debt overhang.
More so, at present, Major Oil firms are not making new investments in the sector, neither are they carrying out any expansion, since government is yet to pay them the outstanding subsidy money.
At a press conference with newsmen, the Chairman of MOMAN, Mr. Andrew Gbodume, appealed to government to clear the outstanding debt, in order to enhance operational efficiency and boost productivity in the oil industry.
He pointed out. “One of the challenges the Nigerian downstream petroleum sector is still facing is non-payment of the long outstanding fuel subsidy to oil marketers. We appreciate the efforts of National Assembly, but non-payment creates a significantly negative impact on operational efficiency of the downstream sector, thereby placing a severe strain on its efforts to continually invest in infrastructure and raise industry standards. We hope the debt would be paid in full to oil marketers, as soon as possible.”
On products supply, he said, “We acknowledge and appreciate the efforts of PPMC over the last few months in ensuring consistent supply of petroleum products within the country. PPMC has demonstrated its resolve in guaranteeing a non-repeat of scarcity the nation experienced at the end of 2017, and quite frankly, has done well, so far”.
The Chairman went on, “However, with Nigerian National Petroleum Corporation, NNPC, being the sole importer and supplier of petroleum products in Nigeria at the cost incurred, it should be clear to all Nigerians that this policy direction is not sustainable”.
He explained, “We believe the path to fully achieve sustainable operating environment for the petroleum industry begins with the downstream private sector. We think the time is now to encourage a well informed and honest debate among ourselves as Nigerians on our downstream pricing policy, showing sensitivity to the fears of Nigerians and the challenges we face as a people and the economy, to arrive at equitable but sustainable business model”.