African Petroleum Plc (AP), a major oil marketing firm explains that its imbroglio with Access Bank, one of its major financiers over outstanding $35.1m (approx N5.2 billion naira) has to do with the rate the bank used in calculating the value of the debts.
The oil marketer claims Access Bank had over-billed it by using a higher conversion rate in computing the debts, which brought up the value to the contested sum being quoted by the bank. The difference in the exchange rate used by the bank has resulted in over N400million being contested by the oil firm.
Access bank claim
"The company is insolvent and unable to pay its debts. In the circumstances, it is just and equitable that the company should be wound up." Such was the conclusion Access Bank Plc. reached following AP's failure to repay the bank $35.1 million.
In a two-page statement carried in two national newspapers on Monday, Access Bank, through it's legal counsel, Olisa Agbakoba and Associates, published details about a case currently at the Federal High Court in Lagos.
The statement read, "The company (AP) is indebted to the petitioner (Access) in the sum of US $35,153,822.15 (approximately ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¦5.2 billion), being the outstanding obligation on the Letter of Credit (LC) opened by the petitioner (Access) on 18th July 2008, on behalf of the respondent (AP) to facilitate the importation of petroleum products."
According to the statement, "The LC was established and booked on 18th of July 2008 and matured on December 1, 2008," but "upon maturity of the LC, the company was unable to settle the LC obligation of $US35.1 which is still outstanding as at the presentation of this petition."
In a counter advertorial published in a national daily on Wednesday, AP, acknowledged borrowing from Access Bank to import refined petroleum products says, "Upon maturity of the Letters of Credit (LC), Access Bank debited AP Plc at the converted rate of N127 to one US Dollar, this was as at 2nd December 2008.
"AP immediately protested the arte of the exchange applied by Access Bank, pointing out to them that the Central Bank of Nigeria (CBN) spot rate on 30th November 2008, which was the maturity date of the LC was N116.62 to one US dollar and even the black market rate was between N119 and N122 to one US dollar at that time." AP says in a letter dated December 2, 2008; it made it clear that it would repay the loan "at the appropriate rate", adding that "several correspondences have been exchanged in a bid to amicably resolve this," to no avail, which forced it to write to the CBN via a letter dated May 15, 2009 to intervene in the matter.
In the Wednesday advertorial, AP also said that Access Bank is indebted to it, as the bank is, "one of the Issuing Houses and Underwriter to AP's 2008 Public Offer/Rights Issue. Access Bank's underwriting commitment is (over) ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¦4.82billion and up to date it has reneged on meeting its underwriting obligation to AP Plc."
Central Bank involvement
Abdullahi Mohammed, CBN's head, Corporate Communications, acknowledged that the Central Bank has received a petition on a case involving Access Bank Plc, a bank in Nigeria and African Petroleum (AP), a customer of the bank and was handling the case as appropriate.
"They have forwarded the case to CBN. When a move like that is being made, it is like going to court and so comments cannot be made on the issue until the appropriate time. The CBN is studying the complaint and it is being handled as appropriate. The just concerns of the public would be addressed at the appropriate time," Mr. Mohammed says.
So far NEXT investigations reveal that none of the parties' share prices has been adversely affected at the stock market following the publication of Access bank's petition on Monday.
Tunde Falasinu, AP's Chief Operating Officer, said the oil marketing firm "will wait for the courts and the Central Bank's response to our petition. I can't pre-empt the decisions of the court and the regulator."
"You can't wind up a company because of one transaction. It's not like we don't have the money. The issue was about the exchange rate. They wanted to calculate based on ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¦127 to $1, rather than ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¦116 to $1. For us, the difference in payment is about ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¦400 million. If they agree to an acceptable rate by both parties, they will get their cheque."
A senior source at Access Bank, who asked for anonymity, said yesterday that "it is unfortunate that this purely commercial transaction with AP has turned out this way. It is a shame."
"If they (AP) could pay, why haven't they begun the process to pay back?" In response to a question asking for clarification about the exchange rates issue and the N400m overcharge, the Access Bank source added that AP "could just have paid in dollars if they are having problems with the Naira conversion. They didn't have to convert from naira to dollars, with us. They could change their dollars anywhere they liked. We told them that. What we want is to be paid back."
In Wednesday's Annual General Meeting, AP declared a dividend of N4,986,210,373 to its shareholders, amounting to N5.20 per share. There was no indication at the AGM that this amount may not be paid to shareholders.
An industry commentator who asked for anonymity wondered the objective in dragging the matter out into the public domain through newspaper advertorials.
"Why not let the court decision take its course" asked the commentator, adding that observers may conclude that by taking action in this way, the bank is "sending a signal about its tolerance level" and those tolerance levels may be worth watching in the coming months. "The court can enforce the bank's rights.
To damage the reputation of your client is a second level of punishment," the commentator noted.
The senior Access bank source however defended the company's decision to publicise the matter through newspapers on Monday. He said that the court mandated them to publish, normal practice, he said, in instances of petitions to wind-down a company. He added that Access bank felt that AP shareholders should know about irregularities with their company's transactions and liabilities owed. He said, "publication of the issue would push AP shareholders to get their company to pay as the court can withhold dividends from being paid if liabilities, from a petition to wind-down the company, are not settled first."
Central Bank pressure
On June 19, 2009, the Central Bank of Nigeria (CBN) sent a circular to all banks, demanding that they "submit to the Ag. Director of Banking Supervision, details of their total exposures to the companies in the Energy Sector, namely Up-Stream, Down-Stream and Oil Service companies, as at May 31, 2009." Lamido Sanusi, the governor of the Central Bank, in his first official speech as governor on July 07, 2009 said: "The CBN surveillance activities will receive new impetus to ensure efficient management and good corporate governance".
In stating the central bank's view that the Nigerian banking sector does not face a systemic risk, he said: "Our view is that there are stress points in banks' balance sheets (margin loans, proprietary positions, oil marketing names, unsecured large exposures) and these are being dimensioned." The Access-AP court case has thrown up one such "stress point."
Banking and industry observers await Wednesday July 22 -when the court will give its judgment and the same day as AP's Annual General Meeting.
Access Bank Plc is amongst the top 10 Nigerian banks by assets with its headquarters in Victoria Island, Lagos. Its chairman is Aigboje Aig-Imokhuede. African Petroleum (AP) is a Nigerian major marketer of refined petroleum products, with its head office in Marina, Lagos. Its chairman is Femi Otedola.
With additional reporting by Oluwaseyi Bangudu and Daniel Osunkoya