FG’s  N500bn debt: Petroleum marketers are having issues with EFCC, AMCON

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Dapo Abiodun
Dapo Abiodun

Chief Executive Officer, Heyden Petroleum Chief Dapo Abiodun  in this interview speaks on the activities of Depot and Petroleum Products Marketers (DAPPMA), investment of indigenous companies in the downstream, midstream and upstream of petroleum industry. Chief Abiodun, who is also the Chairman of DAPPMA also highlights the support of the Central Bank of Nigeria (CBN), Ministry of Petroleum & Power Ministry for prospective investors  particularly for the drive of his company to participate in the  entire value chain of the energy sector. As a politician of repute in Ogun State, Chief Abiodun did not hide his feeling about his willingness to serve the people of Ogun State by contesting  as governor in 2019 on completion of consultations. Excerpts.

What is the update on the amount owed marketers by the government?

The problem of unpaid foreign exchange differentials continued to accrue interest in banks. The amount of money remains outstanding and is crippling marketers’ business which  is also making them have issues with the Economic and Financial Crimes Commission (EFCC) and the Asset Management Corporation of Nigeria (AMCON )

The representatives of the  government listened to us at several meetings yet that amount of money remains outstanding and crippling  business activities of marketers. As a result, some marketers are having issues with EFCC and AMCON while some are facing liquidation. This is a problem that has lingered on for so long.

 The Minister of Finance had collated these claims and gone to the Federal Executive Council (FEC) to seek approval for the total amount due to marketers but because this was not in the budget, it had to go to the National Assembly which could not approve it until it went on recess.

How much is the debt now?

It is in excess of N500 billion. Our prayer was that the payment would begin before the end of July but that has not been the case, interests continue to be mounting up.

The situation is getting worse; most marketers have lost the economic power to even pay their staff because this amount of money has accrued over time.

This time last year when the exchange rate was changed, we had transactions that were done at the rate of N197. The thinking is that once you get naira, you could go to the Central Bank of Nigeria (CBN) at N197 to a dollar. The CBN however raised the exchange rate to N305 per Dollar. So, the same naira we are supposed to get per Dollar  has become double. It is so bad. We know that the Federal Government is doing so much to ensure we are paid but there is just so much bureaucracy involved. We are hopeful that the National Assembly will be gracious enough to come back, if only to address this issue and go back to their recess.

You would observe that there has been stability in the supply of petroleum products in the country since the beginning of the year. This is largely due to efforts by  President Buhari-led administration through the Minister of state, Petroleum and the Group Managing Director of NNPC, who have jointly ensured that marketers and the issues affecting them are being dealt with because that’s the only way we can have the supply and distribution that you see today.

Sometimes last year, we had partial deregulation that took prices of premium motor spirit ( PMS) from N96 to N145 and since then prices of crude oil had been epileptic. However, since the relationship between crude pricing and refined products pricing is directly proportional, any increase in crude oil price will affect prices of refined products. As such, the government has been managing the situation with us.

The government itself has played the role of supplier of last resort meaning that when marketers are not able to import because crude price has gone up.

Despite the fact that the CBN has graciously ensured that  foreign exchange is made available to us as much as we need it through the  Nigerian National Petroleum Corporation (NNPC) intervention.

However, when crude price rallies and gets to a point, even with that forex intervention, we will not be able to import because as crude price goes up and exchange rate remains constant, the landing price of petrol will go up unless we begin to get forex at a rate that begins to follow that differential which of course they cannot possibly do.

What happens is that, government imports and sells to us in Naira to enable us sell at prescribed market rate. So, government has done relatively well and even much better than previous years,

As I said to you, we hope that the National Assembly will come back from recess and approve this. The CBN has been very supportive and strategic to our cause.

We have also pleaded with the CBN to talk to banks to stop accruing interest for now.

So there is a directive on that?

We have appealed to him and I believe he is working on it since the banks know the money is there, so there is no point in accruing interest because it is the FG that will pay the interest anyway.

Looking at HEYDEN Petroleum, I know for the past three years despite economic challenges, we can say that the company has been acquiring several filling stations, can we say that is part of the growth plan of the company?

It is in line with our strategic development plan to play in the entire value chain of the downstream sector. Quite frankly, anyone who is not doing such,  it is only a question of time. In the first instance, we acquired 45 filling stations and all these occurred  between Lagos and Ogun states. Now we can either import our petroleum products or take it from refinery through our own jetty. So, we have control of the entire value chain. If everybody does that, it will become more efficient because  we are not depending on someone to lift products from us. You know, in Nigeria, we are under-retailed.

For instance, we have about four filling stations in Victoria Island . However, under the leadership of the Minister of state for Petroleum Dr Ibe Kachikwu, a lot of incentives were put  into the retail to bridge the margin at the retail end. We are also targeting upstream because we are one of those that won the bid for the direct purchase of crude. So, we are able to get crude from government and bring back the desired petroleum products.

What about Midstream?

We are talking with partners. You are aware that part of the conditions we gave government is to fund the upgrade and repair of the refineries. We are also collaborating with Nigerian Petroleum Development Company (NPDC) in the production of LPG. We are hoping that in the nearest future, we will be one of the largest producers of LPG in the country and for us, LPG is very strategic. This is because we also have a subsidiary which we own 100 per cent in the power generation business-First Power. We took over the Ijora power plant which is the first in Nigeria. We have installed turbines and gas pipelines. We are about to commission the plant.  We are looking at generating power.

 What’s the capacity we are looking at?

It is a 60 MW plant when it was at its peak. What we have done today, we have done a 14 MW plant there in the first instance. But being a Genco, we are going to rely not only on Nigeria Electricity Regulatory Commission (NERC) as regulator but also DISCOs. The power plant itself has been built and completed for over one year and today we are just waiting for the formality between us and Eko Disco to begin  generation.

Is that under the agreement of embedded power plant?

Yes, I have embedded power plant. So, you can imagine if it were to be a bigger power plant, we would have a bigger exposure. Our plan is to start and then increase generation capacity gradually.

Is it natural gas or LPG?

It is natural gas. The power plant will serve the Central Business District whose primary customers are around Marina. We have the CBN, Nigerian Stock Exchange (NSE), banks and the like. We designed it to meet their demands. So, you can see that HEYDEN is a full integrated energy company.

What are you doing about payment because Discos today are having issues with payment?

We are an embedded power company and we expect that the DISCOs will pay us. They are having challenges with tariff. Unfortunately, there was devaluation of currency last year. The gas is the most expensive component which is dollar-indexed. You were paying an amount in dollars for gas like N197 last year at X amount. Suddenly, it went from N197 to N305. How will that tariff now hold? If my price has gone from N197 to N305 and I am buying gas before at $7/scf and my tarriif was N25/ Kwh. So, these are the kind of things affecting operations. Meanwhile, the tariff is regulated. The DISCOs cannot just wake up and change the price. However, as a Genco, I will pass my bill to the DISCOs while the DISCOs have any to pass it to the consumers.

We have met with the Minister of Power who has agreed to find  amount in dollars for gas like N197 last year at X amount. Suddenly, it went from N197 to N305. How will that tariff now hold? If my price has gone from N197 to N305 and I am buying gas before at $7/scf and my tarriif was N25/ Kwh. So, these are the kind of things affecting operations. Meanwhile, the tariff is regulated. The DISCOs cannot just wake up and change the price. However, as a Genco, I will pass my bill to the DISCOs while the DISCOs have any to pass it to the consumers.

We have met with the Minister of Power who has agreed to find everything within the law that allows us to do things differently  as an embedded power plant so that there will be a willing buyer and willing seller agreement which allows us to operate viably. If not, the business has grounded before it even started. It is one of the hazards of doing business in a developing economy.

Are you going to com-mission the plant before the end of the year?

Definitely

So, what about funding for the scale-up?

There are many investors ready to fund power plants. The challenge has just been the tariff. The assurance that a financier wants is the guarantee that we will be able to generate, and receive  payment  for power being  generated.

Now to politics, in 2015, you contested for Senate, how prepared are you for 2019?

There is a saying that man proposes but  God disposes. My desire to go to the senate was borne out of the thinking that if we all avoid politics, then anybody can just go there whereby things may not work as we desire. So, I thought to come and change the plight of people and touch the lives of people. At present, I am focusing on my business. I have had a lot of people call and approach me. They have tried to get my interest, to persuade me to join the governorship race.

 However, we are thinking and praying about it and I can assure you that you will be one of the first to know once we make the decision

Looking at the zoning arrangement in favour of Ogun West, which Governor Amosun is talking so much about, what opportunity is left for a candidate like you from OGUN East Senatorial District?

Well, you know that Governor Ibikunle Amosun is not the owner of All Progressives Congress (APC). The APC as a party has not taken a position on zoning. But I do believe that the choice of where a candidate comes from is not the exclusive preserve of any incumbent governor. When Amosun became Governor, there was also a clamour that it should come from Yewa. So, he himself knows that. Amosun today is the governor of Ogun state and not from Yewa. I think we should leave it at that.

On the issue of fuel supply, how prepared is DAPPMA to take over from the majors?

Let me tell you today that DAPPMA distributes over 75 per cent of petroleum products .If DAPPMA should shut the door today, everyone will be affected. This should tell you that DAPPMA has taken over. We have the largest number of filling stations, jetties and retail outlets. We are taking over. This is because in terms of decision making, we are there. It is just like a situation where an  International Oil Company (IOC) left a place and an indigenous company went to the same place and drilled even more wells. We are more bullish.

On the issue of debt recovery by AMCON, some of your members are complaining about the way it is going about debt recovery whereas government is still owing…

The debt to AMCON has been captured. Definitely, AMCON will be more understanding. It has been worked out based on what we discussed with the government.

What are the prospects for HEYDEN in three years?

Our strategy is that in a few years, we will be an indigenous company producing about 30,000 barrels per day (bpd) of crude oil. We will be one of the largest indigenous oil company in Nigeria.

Have you identified a particular field?

Yes

Marginal field?

Yes, a marginal field. We will produce LPG in the country. By so doing, we will be operating in the entire value chain. We will be one of the largest indigenous power producers.

With this, how do you feel looking back from 2001?

  I feel privileged and blessed. We are a blessed country with much opportunity. It also confirmed the fact that every Nigerian has the potential to be great. I am thankful to God for life, for being a Nigerian.

What can others learn from you?

 It is all about the fear of God. You need to have faith in God and the system. We should be able to persevere. I think that the sky is the limit.

How do you combine family and business?

You are the one delaying me. I ought to have been home by now, enjoying time with my family. It is about creating a balance.

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