The Federal Government, Monday, scheduled to pay off about N264 billion between now and end of March, as subsidy reimbursement applications submitted to marketers as at end of January 2015.
A breakdown showed that the sum comprises 2014 outstanding debts of N164 billion in addition to N100 billion derived from foreign exchange and bank interest charges.
The decision was arrived at a crucial meeting with the Ministries of Finance, Petroleum Resources, the Central Bank of Nigeria (CBN) and oil marketers in Abuja on Monday at the instance of the Minister of Finance, Dr. Ngozi Okonjo-Iweala.
The decision to pay off the marketers’ outstanding subsidies plus forex differentials and interest rates became necessary to douse supply pressure on premium motor spirit (PMS), also known as petrol, which Nigerians have been struggling to get in recent days.
Executive Secretary, Major Marketers Association of Nigeria (MOMAN) Obafemi Olawore, confirming the development in Lagos, yesterday. “The Minister (Okonjo-Iweala) met with marketers and gave a schedule of payment for outstanding subsidy invoices from now till the end of March.”
He told journalists that the payment schedule got the nod of principals across the majors, independents and depot market operators. As a result, “product supply that should have gone down will now pick up again. Also, any current tightness noticeable in the market is only temporary.”
The MOMAN secretary admitted that supply was tightened because marketers had reached and exceeded their loan limits with the banks, and as such, are unable to access any more bank facilities. Devaluation of the naira had also made getting loans from the banks more difficult.
“Before devaluation, the exchange rate was N171.36 -$1, while landing cost for PMS was N90.67/litre. As inter-bank rate went up to N188-$1, landing cost also rose to N98.36/l . As at today (yesterday), with exchange rate now N199-$1, landing cost rose to N103.45/l, and if it now moves to N215-$1, landing cost will move to N110.84/l,” Olawoore said.
Consequently, he argued that the successive devaluation of the Naira had eaten up any benefit that would have been derived from the falling price of oil at the international market, a development that has seen the rise of the pump prices of other fuel products such as kerosene, diesel and aviation fuel.
With the devaluation of the Naira, the amount the Federal Government is paying as subsidy on PMS, yesterday, rose to N31.08 per litre. As it stands, if petrol is deregulated and subsidy on the product is removed, a litre of PMS would cost N118.08.
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