Some Bulk Oil Distributing Companies (BDCs) are going to the unregulated forex market (black market) to shore up dollar requirement to import oil into the country.
This is because the Bank of Ghana and the commercial banks are unable to meet the dollar supply, leaving a gap of $350 million to be filled to enable BDCs import needed oil monthly.
While BDCs require about $450 million monthly, the Central Bank is currently providing $100 million per month, having reduced its supply requirement from $214 million at the opening window.
Mr Senyo Hosi, the Chief Executive Officer (CEO), Ghana Chamber of Bulk Oil Distributors (CBOD), said the country could “over time have a major fuel crisis” if the forex challenges were not addressed immediately.
Responding to a question posed to him by the Ghana News Agency on Thursday during a virtual engagement with the media, he said, “BDCs do go to the black market, but it’s not the norm.”
“With this indication that 21 per cent is what’s been covered for this month, you’re going to find the commercial banks cover 79 per cent. They may do it in different phases, some of them will lag and that’s where the problems are. If there’re challenges with them filling that gap, over time, we’re going to have a major supply challenge,” he said.
“The black market isn’t the default option, it’s the commercial banks. Our solutions going forward will not include illegality, so we’re looking at working with the commercial banks to compensate for it,” Mr Hosi said.
Mr Hosi who is also a Finance and Economic Policy Analyst stated that: “All that BDCs want is petroleum prices reflecting the actual currency rate that they sell and them accessing the forex when they need it.”
He explained that the current challenge of BDCs on the forex market was due to the non-availability of liquidity as well as pricing, which is much lower than the requirement of companies.
“Those are the things that the international oil traders are seeing and it’s making them apprehensive, and that’s why Bloomberg will come and speak [about looming fuel shortage] because they’re seeing a possible withdrawal of supplies,” he said.
The Chamber’s CEO allayed fears of any shortage in fuel in the country, and said: “Thankfully, we’ve already initiated steps to address some of these, and we’ve been doing this with the Central Bank.
“I am confident that in the next two to three weeks we should resolve most of these challenges and as we resolve them a lot more confidence should come back into the system,” Mr Hosi added.
We’ve also had meeting with the Special Purpose Vehicle (SPV) jointly owned by CBOD and the Association of Bankers to develop de-risking mechanisms in the petroleum financing sector… and we’re making substantial progress.”
Ghana’s trading currency, the cedi has depreciated by 22 per cent against the dollar this year, while inflation also jumped to 27.6 per cent in May – the highest level in more than 18 years – all contributing to the forex challenges.
Meanwhile, Mr Ken Ofori-Atta, the Minister of Finance, has given the assurance that the Government was committed to implementing measures to address the persistent depreciation of the Ghana cedi against its major trading partners.
He said that: “The implementation of the 30 per cent cut in expenditures and other expenditure measures approved by Cabinet are all helping to reduce the fiscal deficit and thereby reduce the pressures on the exchange rate.”
He added that the Government was also arranging to raise about $1 billion to support the 2022 Budget and foreign exchange reserves, which was expected to improve the supply of the foreign currency and stabilise the Cedi.
The Minister said this when he responded to a question posed to him in Parliament by the Member of Parliament (MP) for Bongo Constituency, Mr Edward Abambire Bawa on Wednesday.