The persistent rise in the prices of petroleum products at the pumps in the last couple of months will now be a thing of the past, the Chief Executive Officer of the Chamber of Bulk Oil Distributors (CBOD), Senyo Hosi, has assured.
This follows the major intervention by the Bank of Ghana (BoG). The central bank took a decisive decision to introduce a foreign exchange forward auction for Bulk Oil Distributing Companies (BDCs), a move meant to help stabilise fuel prices at the pumps in the coming weeks and beyond.
In what is expected to be a major welcome news to the public and the business community, the move will also help to restore market certainty, check inflation and invariably positively impact the disposable income of workers.
Mr Hosi said the move by the central bank would help minimise currency speculations and also improve the credit confidence of their suppliers.
Crude oil prices have been volatile in recent weeks, following Russia’s invasion of Ukraine, with the commodity selling at US$99.19 per barrel on the international market as of Friday, April 8.
This is down from the highest price of about US$130 per barrel in the last couple of months.
This rising price of crude oil on the international market, coupled with the depreciation of the cedi, have led to high fuel prices at the pumps in Ghana. It’s attendant effect has been rising inflation which stood at 15.7 per cent as of the end of February with the rate for March expected to inch up further.
Speaking in an interview with the Graphic Business in reaction to the move by the BoG, Mr Hosi said the chamber was grateful to the central bank for providing a structured support to stabilise price fluctuation of fuel.
“We believe this will help minimise currency speculation which sometimes forces prices to go up unnecessarily,” he stated.
In an attempt to address the shortage of dollars for the local petroleum sector and also help the BDC’s to meet their monthly import bill of US$300 million, the BoG last week introduced a foreign exchange forward auction for BDCs operating in the country.
This is intended to minimise the uncertainty of the future availability of FX and aid price discovery, especially for the general pricing window within the downstream sector
According to the central bank’s guidelines, the FX Forward Auctions – which are exclusive for BDCs licensed by the National Petroleum Authority (NPA) – are only on a forward basis at a 30-day auction tenure of a targeted amount as determined by the bank.
In the maiden auction on March 30, 2022, the central bank sold about US$104.86million above the auction target of US$100million at a rate of GH¢7.39 to a dollar.
Threat from suppliers
Mr Hosi said prior to this intervention, most of their suppliers were threatening to minimise or cut them off supplies due to their inability to mobilise enough forex.
He said the intervention would, therefore, bring back confidence in the industry.
“By assuring us of supply to the market, the suppliers will now have confidence in our market. This intervention was very timely and critical,” he stated.
He said the BDCs would ensure that they translated this into better prices at the pumps.
With the BoG cautioning all participating BDCs to fully comply with the rules and regulations governing the auction process, Mr Hosi gave an assurance that the chamber itself would put in place mechanisms to ensure all members complied.
He said the chamber would also put in place measures to eliminate any situation where any BDC would take the forex and use it for other purposes.
“The guidelines are clearly spelt out and we are also supporting an audit system that will require what people had actually done, what is required of them to ensure that there is total compliance with the guidelines.
“We are also adopting the auction rate or the outcome of the processes in our market outlook to serve as a guideline for BDCs and Oil Marketing Companies (OMCs) as well,” he stated.
Impact of cedi depreciation
Commenting on how the recent depreciation of the cedi had impacted their businesses, he said this had hugely impacted on their cost of trading and foreign exchange differential risks.
“A lot of companies have made major losses in the whole of March.
“We are still doing an evaluation to determine how much our members have lost due to the instability of the cedi,” he noted.
Also speaking in an interview with the Graphic Business, the CEO of the Association of Oil Marketing Companies (AOMCs), Kwaku Agyeman Duah, said any decision that would bring some forex stability was a good one for OMCs in the country.
“Once the currency stabilises, we are okay so we welcome any move to help in this regard,” he stated.
He also emphasised that once the currency stabilises, the prices of fuel products at the pumps would also stabilise. It will not be increasing at the rate that had been witnessed in recent weeks.
He pointed out that some of the OMCs had even stopped listing products because of the instability in the market.
“If you list your products, how are you going to price them? You price and lose so why will you even go for the product?