NNPC owes N735 billion to importers

Written by Daily Trust Tuesday, 27 July 2010 02:38

The Nigerian National Petroleum Corporation (NNPC) is indebted to about $4.9 billion (equivalent N735bn) in backlog of payments to importers of fuel products for the cash-strapped oil company.
Documents obtained by Daily Trust from oil industry sources show that as at May 5, NNPC was owing $4.073 billion to 42 oil importers for cargos of refined petrol and kerosene supplied to the corporation. The figures shot up to $4.9 billion by June 30, according to NNPC executives who held a meeting with the importers in London on July 14 to reassure them of plans to offset the debts.

The unpaid monies accumulated over a period of several years starting during the Olusegun Obasanjo administration, a source familiar with the matter told our reporter last week.

Apart from the billions in backlog of payments, as at July 14 there were 36 vessels of petrol and nine vessels of kerosene supplied to NNPC which were yet to discharge in Lagos, and each vessel is estimated to be worth $27 million. When this is added to the outstanding balances, NNPC’s total indebtedness to the importers is estimated to be around $6 billion, which a source in the industry said is the highest in the history of the corporation.
This revelation is coming in the wake of controversy over whether the NNPC is broke, after its Group Managing Director Austen Oniwon wrote to the Federal Ministry of Finance two weeks ago saying the corporation was technically insolvent because of unpaid subsidies it was demanding from government.

When contacted last Wednesday, spokesman for the NNPC Levi Ajuonuma said he needed some time to verify the claims at the PPMC and the finance division of the corporation before making comments. When our reporter got back to him on Thursday, he said he was in Lagos and did not have the required information yet. Yesterday, Ajuonuma did not take calls and did not reply to text messages from our reporter.
But an official at NNPC confirmed that the corporation is indebted to the importers, though he could not give specifics.

Local and foreign importers get quarterly fuel importation contracts from the NNPC through its subsidiary, the Products and Pipelines Marketing Company (PPMC), and payment is supposed to be made 45 days after the notice of readiness for vessel to discharge at Lagos offshore.

But bureaucratic bottlenecks and other factors delay payments by up to 275 days after submission of invoices, leading to the piling up over the years of the hundreds of billions in debts. Accumulation of interest at 1.4 per cent per annum also contributed, a source said.

Because of the delays in payment, the importers became agitated, leading the corporation to convene a meeting with them at its London office on July 14 to reassure them. There was a similar meeting earlier in February, which a source said did not produce any result.

At the London meeting two weeks ago, the NNPC told importers that it would settle $3 billion of the debts by the end of August and the remaining balances would be offset over nine months.

A reliable source said NNPC plans to seek for approval to take $2 billion from the NLNG dividend account being held by the corporation and $3 billion from the excess crude account for use to defray the debts.

The implication of the debts for the importers is that banks are now unwilling to finance their contracts, a source said, adding that failure for the companies to import could cause fuel scarcity across the country.

The companies being owed by NNPC include Addax Energy, Allemaine Int’l, AMGPetrol, Anglo Energy Corporation, Arcadia Petroleum, Astana Energy Corp, Attock Oil, Base Trade, Belgrave Holdings, BP Oil Ltd, Calson B., Curtis Petroleum, Delaney Petroleum, Duke Oil Com, Folawiyo Energy, Glencore Energy, J&S Services, JPM Supply, Linetrale Energy, M.R.S. Oil & Gas and Matrix Energy.

Others are Mid Atlantic Fuels, Napoil, Netura, Nigermed Pet, Oil & Gas Trading Co, Onmart, Orpington Trading, Ovlas S.A., Pennington Energy, Performing Energy, Petroldel, Raydric General Trading, Sahara Energy, Sanduff Oil & Gas, Shell Western, Sullam Voe, Sunray Petroleum, Total Int’l, Trafigura Beheer BV, Vitol SA and World Wide Energy.

In the past two weeks, NNPC has been involved in controversy over claims that it was cash-strapped. Minister of State for Finance Remi Babalola told a meeting of state and federal finance officials on July 13 that “NNPC is insolvent as (it’s) current liabilities exceed current assets… NNPC is incapable of repaying the N450 billion owed to the Federation Account unless it is reimbursed the 1.156 trillion naira (in subsidies) it has requested from the Federal Ministry of Finance.”

But this statement elicited blunt reaction from NNPC, which said it was capable of discharging its obligations. Also, Finance Minister Segun Aganga and his Information counterpart Dora Akunyili said Babalola’s statement was incorrect and that the oil corporation was not insolvent.