How Nigeria raised $1.5b to finance fuel subsidy
*15,000bpd Is Collateral
* Subsidy not working,Tam David West insists
BY KUNLE KALEJAYE
Former Minister of Petroleum Resources, Prof. Tam David West, seems to have given up on the country’s subsidy palaver.
The removal of the subsidy of petrol by President Goodluck Jonathan on January 1, 2012 led to nation-wide protests that lasted several days with support from labour unions and civil society organisations.
To cushion the pains of the removal of subsidy, the Federal Government initiated a palliative, Subsidy Reinvestment Program (SURE-P).
When contacted by Sunday Vanguard to comment on the $1.5 billion borrowed by Nigerian National Petroleum Corporation, NNPC, to finance fuel importation, the former minister’s response was negative.
“I’m tired of talking about subsidy. Have I not talked enough about subsidy? Petrol still sells for N110 and the government has done nothing about it. I think I have talked enough about subsidy,”David West said.
The NNPC was said to have obtained a $1.5 billion syndicated loan to pay debts to international fuel traders last week.
According to a senior banking official with knowledge of the transaction, the deal was struck at the end of last year and is seen as crucial to easing the burden on big commodity traders facing the prospect of painful multi-million dollar write-offs.
The loan, provided by several Nigerian and international banks and brokered by Standard Chartered, will be paid back over five and a half years. The NNPC has put up 15,000 barrels per day of its oil production as collateral, the banking source said.
Standard Chartered and the NNPC declined requests for official comment.
NNPC, Africa’s top oil producer, is said to owe major commodity trading houses, including Glencore and Mercuria, around $3.5 billion in unpaid fuel supply bills, according to a report last year commissioned by the Nigerian oil ministry.
Nigeria,an OPEC member, is among the world’s top 10 crude oil exporters, but has insufficient refining capacity to meet its domestic fuel needs and is heavily reliant on imports, on which it pays costly subsidies to keep a lid on retail petrol prices.
President Goodluck Jonathan attempted to end fuel subsidies in Nigeria a year ago but backed down after it sparked wide-spread protests against higher fuel costs.
Decades of mismanagement and corruption have left NNPC heavily indebted, several audits have shown.
A list of creditors published in an oil report earlier this year showed there were 35 firms still being owed.
Trading companies have been battling for months to recoup the money and some have since stopped supplying Nigeria with fuels. But they have mostly remained in the west African country partly because of huge opportunities in the upstream sector.
The list showed that Glencore was owed $138 million, Vitol was owed $198 million and Trafigura was owed $53 million.In reality, debts for some individual trading companies are widely thought to be much higher due to exposure via subsidiaries and partner firms.
For example, Bermuda corporate registration documents showed that Calson, owed $115.11 million by NNPC, was using Vitol’s Geneva address. Similarly, Napoil, owed $75.6 million, is a partner of Trafigura, its website showed.
No matter. Petroleum Resources Minister, Diezani Alison-Madueke has been able to streamline operations of importers while also instituting a fresh and prudent regime of subsidy funds management.
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