Bulk importers of oil are having to brace up to shoulder their own risk following a decision by the Bank of Ghana (BoG) to halt its guarantee of the supply of forex (FX) for the importers.
This means that the oil importers will have to source and negotiate their own FX and manage the risk thereof.
But it could also mean for the consumer that government may, in the future, not be in a position to intervene in pricing and the rise and fall of prices will affect the consumer’s pocket accordingly.
This is because while accepting the challenge to shoulder their own liabilities, the oil importers say government must, in turn, desist from intervening in pricing.
The current pricing and trade financing model is built on the assumption that the Government of Ghana, through the BoG, guarantees the FX supply for oil imports and underwrites the FX losses resulting from the pricing assumptions adopted by the National Petroleum Authority (NPA) in the price build-up.
To this end, the industry trades under the NPA’s pricing model irrespective of the market soundness of the FX rate applied.
In view of the BoG’s decision, however, the umbrella body of the oil importers, the Ghana Chamber of Bulk Oil Distributors (CBOD) has been advising members to “immediately commence operating under the reasonable assumption of no further government liabilities.”
CEO of the Chamber, Senyo Hosi said the BoG’s decision and a decision by the Finance Ministry not to entertain any more forex under recoveries or losses from companies, will redefine the structure of the industry moving forward.
“We have sold when pricing as set by the NPA was not prudent. We sold when NPA pricing showed under-recoveries which were unbudgeted for. We sold when NPA pricing yielded FX under-recoveries even in excess of our total suppliers’ premium. We have sold trusting and expecting the government to honour its obligations,” Senyo Hosi said at the Chamber’s Annual General Meeting last Friday.
“We failed to respond appropriately to a pricing model that compounds and threatens our survival, and that of our stakeholders, especially where we have had little to no evidence of government’s budgetary provision or capacity to timeously pay. As an industry we cannot continue like this.”
CBOD warned recently that its members may not be able to ensure stable supply of fuel at the pump since their bankers have begun scaling back issuing Letter of Credit following the BoG’s decision not to guarantee FX supply. Some of the banks have, indeed, confirmed this to the B&FT.