Senyo Horsi
Bulk Oil Distribution Companies (BDCs) are livid that the Bank of Ghana (BoG) no longer provides them dollars for the import of petroleum products into the country.
According to them, in recent times, when they request for dollars from the Central Bank, they are told to buy from the open market.
Operators of BDCs alleged that BoG supplies dollars to two state-owned institutions which are also into importation and sale of refined petroleum products.
These are Bulk Oil Storage and Transportation (BOST) Company Limited, which is also importing and selling refined petroleum products as against its mandate of keeping strategic stocks just like BDCs, as well as Ghana Oil Company Limited (GOIL), which also operates the BDC called GO Energy.
BOST venturing into importation and distribution of refined products raises questions about margins in the petroleum price build-up aimed at helping BOST to maintain the strategic reserves.
This is said to be one of the key factors fueling the fast depreciation of the cedi.
BoG denying BDCs dollars sounds strange because the Central Bank said it was pumping $20 million a day to stabilise the cedi.
Per BoG’s decision, $20 million a day will translate to about $600 million in a month.
With six months’ import of petroleum products amounting to over $1billion, it means the BDCs needed about $150 million a month to import products. The BDCs supply about 80% of refined products.
In an open market where demand and supply greatly impact the depreciation of the cedi, BDCs buying millions of dollars from the open market can only weaken the depreciating cedi further.
It is, therefore, surprising that the BoG refuses to supply BDCs $150million a month, out of the $600 million it injects into the system in a month to stabilise the cedi.
This year, the cedi has been volatile as dollar demand by local firms continued to outstrip supply amid market uncertainty over the local currency's outlook. The cedi rallied strongly in the month of July after slumping 25% in the first half of the year but has since lost all the gains.
BDCs argued that BoG supplying dollars to BOST and GOIL, and asking all other BDCs to purchase from the open market, is not fair because BoG rates are lower than open market rates.
Therefore, the practice gives unfair advantage to BOST and GO Energy over all other BDCs.
The BDCs, which have invested millions of dollars into their business by way of infrastructure development, see the move by the Central Bank as a state-led approach to make GO Energy and BOST the major players at the expense of all the other BDCs.
Under the current deregulation policy, what it means is that BDCs, who buy dollars from the open, will have to sell their products at prices a bit above that of BOST and GO Energy, in order to recover the difference between BoG rates and open market rates.
Last month, the cedi returned to its position as the worst performing currency on the African continent few weeks after gaining significant value against the US dollar.
The currency returned to GH¢4 to the dollar on the forex market.
Ecobank Research quoted the depreciation of the Ghana cedi at 23% to the dollar as of the close of trading on Friday, August 21. It traded at GH¢4.20 to the world’s most important currency.
The recent intervention by the Bank of Ghana on July 14, 2015, which saw an injection of $20 million daily for almost a week, pushed the cedi to a low GH¢3.31 to the American ‘greenback’ in July.
