Nigerian fuel marketers Thursday warned that supply and distribution of oil products across Nigeria may be grounded if the government fails to pay them Naira 800 billion ($2.2 billion) in subsidy arrears owed on imports over the past three years.

Nigeria usually imports around 1 million mt/month of gasoline, with the major marketers accounting for around 40%.

The gasoline is bought on the wholesale market on a dollar-denominated basis and then sold into the retail market at a capped price of Naira 145/liter ($0.45/l).

The marketers in a joint statement said the bulk of the debts were accumulated bank charges on loans obtained to place orders for gasoline cargoes, which accrued on imports done between 2014 and first quarter of 2017.

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“As a result of the unpaid interest and foreign exchange differentials, we are becoming insolvent and financially handicapped to continue operating profitably,” the marketers said.

“The outstanding matured Letters of Credit are currently over $1.2 billion. Because many Nigerian banks were involved in raising this fund, the entire Nigerian banking system is at risk on account of these transactions.”

The government used to pay a subsidy on imported gasoline in order to keep domestic pump prices low but the administration of Muhammadu Buhari, which is contending with a sharp drop in oil revenues as a result of the slump in global prices as well a decline in the country’s oil production, ended the subsidy regime this year.

A spokesman for the Major Oil Marketers Association (MOMAN), Femi Lawore, said that while many marketers halted imports in the third quarter of 2016, some others, including the downstream subsidiary of France’s Total, were still importing some quantities.

“Apart from those still owed arrears on subsidies, banks are threatening to seize properties … of marketers yet to repay interest charges on loans” taken to finance gasoline imports, Lawore told S&P Global Platts.

MOMAN members include energy firms Oando, Conoil, Forte Oil and MRS, as well as the downstream subsidiary of Total.

Nigeria, Africa’s top crude oil producer, imports nearly 85% of its petroleum product needs due to limited domestic refining capacity.

Oil Minister Emmanuel Kachikwu on Wednesday said local refineries currently meet only 23% of Nigeria’s daily fuel requirements, estimated at 35 million liters, while the government spent Naira 3.35 trillion to import the balance in 2016 alone.

–Edited by Jonathan Fox,

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