The Bank of Ghana’s (BoG) inability to provide sufficient Dollars to Bulk Oil Distribution Companies (BDCs) for importing petroleum products is exacerbating the cedi’s depreciation.
Despite 15 auctions this year, the Central Bank has only allocated a total of $300 million to the oil importers, a far cry from the over $1.2 billion requested by the BDCs.
Bids range from $64m to $107m
The bids submitted by BDCs in these auctions ranged from $64 million to $107 million, yet the BoG auctioned a mere $20 million per auction, meeting only 19% to 31% of the total requested amounts.
BDCs frustrated
This shortfall has led to frustration within the oil distribution sector, with some BDCs halting their participation in the auctions altogether.
Auction exchange rates
The exchange rate between the cedi and the U.S. dollar during these auctions has seen a significant rise, moving from GH₵12.1369 in January to GH₵15.6062 by August 28, 2024.
Notably, BoG’s auction results, published on its website, have left out the value of bids submitted by the BDCs, providing only the total amount requested for the August auction.
When The NewsCenta requested the data on the value of bids submitted by BDCs for the remaining 14 auctions, the response was that BoG is unable to share the data.
Determined to paint the true state of affairs, this paper resorted to other sources to obtain the value of bids submitted by the BDCs.
BDCs need $480m monthly
With BDCs requiring approximately $480 million per month to meet national petroleum demands, they have been forced to source dollars from the open market to source for the over $5.7 billion needed annually to import petroleum products.
This has placed additional pressure on the cedi, contributing to its sharp depreciation.
Depreciation fueling rising cost of living
As a result, the falling cedi has pushed up the prices of goods and services, further escalating the cost of living for Ghanaians.
Depreciation adds over GH₵100bn to public debt
The depreciation is also inflating Ghana’s public debt.
Central Bank data reveals that the weakening currency added over GH₵100 billion to public debt between January and June this year.
18.6% depreciation since January
As of July 2024, the cedi had depreciated by 18.6% against the U.S. dollar.
The Central Bank’s own July 2024 Summary of Financial and Economic Data shows that the cedi lost 7.7% of its value in March 2024, 10.5% in April, and continued to fall by 15.9% and 18.6% in June and July, respectively.
$6.865bn International Reserves
Although the BoG has managed to increase Ghana’s Gross International Reserves to $6.865 billion by June 2024, equivalent to 3.1 months of import cover, and $4.522 billion when excluding encumbered and petroleum assets, the BDCs’ inability to access sufficient dollars threatens to undermine these efforts.
The Central Bank’s focus on building reserves is a necessary part of meeting International Monetary Fund (IMF) conditions, but the ongoing depreciation of the cedi raises questions about why the BoG has not increased its dollar supply to alleviate pressure on the currency.
Christmas season demand for Dollars
With Christmas approaching, demand for dollars is expected to surge as traders seek to import goods for the holiday season.
This seasonal spike could further worsen the Cedi’s woes unless the Central Bank acts to increase dollar availability.
Experts advocate increased BoG intervention
Industry experts suggest that injecting $1 billion into the market between now and the end of the year could help stabilize the cedi and ease price inflation.
