The losses were recorded between May and July 2017 mainly because the oil wholesalers and retailers were forced to lower their margins due to the presence of smuggled products on the market which sell far lower than the market price, as they evade taxes on them.

According to the Ghana Chamber of Bulk Oil Distributors (CBOD) Pricing Analysis for the months of May to July 2017, premiums of BDCs fell drastically over the period under review compared to previous months.

“The BDC premiums for the three months averaged $6.5 per tonne for gasoline compared to $66.2 per tonne, and $30 per tonne for gas oil compared to $65.7 per tonne.

“This represents 90 per cent and 54 per cent drop in BDC premiums for gasoline from the 2017 first trimester position. It also marks 94 per cent and 73 per cent drops compared to the indicative NPA’s premiums of $112.17 per tonne,” the report noted.

It attributed the declining BDC premiums over the period to the unhealthy competition in the industry and the influx of illegal petroleum products (export dumping and inward smuggling).

“The dwindling premiums raise huge concerns over the commercial activities of the BDC trade and threaten the ability of BDCs to honour their financial obligations to their suppliers and banks,” the Pricing Analysis Report noted.

Chamber’s CEO

The Chief Executive Officer (CEO) of the BDCs, Mr Senyo Hosi, said the figure was likely to rise if the government, security services and other stakeholders did not take immediate steps to stop the illicit activities of fuel smugglers.

Already, Oil Marketing Companies (OMCs), including GOIL, Vivo (Shell), PUMA Energy, PETROSOL and ENGEN are posting millions of losses monthly, attributable to the unscrupulous activities.

The government would lose an estimated GH¢1.5 billion in revenue and taxes to illegal fuel trading activities in 2017 if the activities of culprits are not halted, industry watchers have warned.

NPA’s assurance

However, CEO of the National Petroleum Authority (NPA), Mr Hassan Tampuli, assured the BDCs, OMCs and other stakeholders of moves to resolve the issues.

In an interview with the Daily Graphic, Mr Tampuli declined to give further details on the next line of action with the explanation that “until we complete the sector agency’s consultation, it will be premature to give further details.”

Fuel prices 

The report further noted that GOIL, Vivo Energy (Shell) and Total sold their fuel at higher prices as compared to other OMCs in the country during the months under review.

The CBOD report said despite the increase in the fuel prices at the pump, the companies still increased their market shares from 43.28 per cent in 2016 to 45.09 per cent in 2017.

The increase in the market share of the three companies, the report noted, was due to the quality of service rendered by the cited companies.

“Their market share in 2017 increased from 43.28 per cent to 45.09 per cent. This suggests that consumer purchase decisions are increasingly being inspired by the quality of service and other factors and not just price,” the report noted.

The report noted that FRIMPS Oil, Glory Oil and PUMA Energy continued to top the OMCs with the lowest price on the market.

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Source: Graphic Online

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The Chamber which made the observation in its maiden report on the sector explained that such acts created unhealthy competition in the industry and threaten the ability of BDCs to honour their financial obligations to their suppliers and banks.

[contextly_sidebar id=”aOxIKyENkJ1Od57zJKVmGZKlC1avCdP5″]The National Petroleum Authority (NPA) earlier in 2017 disclosed that Ghana was losing about GHc850 million annually in taxes, due to the increased activities of fuel smugglers into and out of the country.

According to the report such conditions including consistent reduction in crude oil prices on the international market made consumers benefit more within the period under review at the expense of the BDCs.

“The months under review saw consumers and OMCs benefit from lower-than-market ex-ref and ex-pump prices. This has been at the expense of BDCs who have had to trade at uneconomic to negative margins.”

The report also noted that “this situation is unsustainable and poses a major risk to the viability of BDCs.”

The Chamber further called on industry regulators to take immediate steps “to mitigate this evolving risk.”

Click here for the full report:

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By: Godwin Akweiteh Allotey/citifmonline.com/Ghana
Follow @AlloteyGodwin

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Government is currently indebted to about 17 Bulk Distribution Companies in excess of 500 million dollars.

In government’s bid to clear debts owed BDC’s, Citi Business News understands a payment plan was agreed by the BDCSs, the Ghana Association of Bankers and the Finance Ministry in which payment of the debt will be made through a Special Purpose Vehicle (SPV) to be known as the legacy bond limited and shared fairly among the debt holding banks.

However new documents cited by Citi Business News reveal that the agreement may be ditched by government authorities.

Speaking to Citi Business News Senyo Horsi said he is confident government will go by the contract agreed by all parties.

“For me am confident the Ministry of finance would want to execute and respect the structure laid down and has agreed to for the debt to be paid within the period set. I have very limited reason to want to doubt their commitment to the structures and so I would encourage industry not to be afraid. I think this will be properly resolved.”

Though Senyo Horsi stated that he will be quite surprised if government decides not to to abide by the agreement reached with all parties he insisted that government was committed to ensure that the parties received what was due them.

‘I think that would bother on the ministry and its commitment that it made to the banking industry and us the BDC’s as well. But I don’t see that happening. You know when debts like this are being paid you hear all kinds of rumours but I trust the minister and his deputies and their work”, He stated.

Meanwhile documents sighted by Citi Business News reveal that the parties involved have begun raising concerns following moves by the Finance Ministry to rather pay the BDCs through their own private accounts and ditch the agreed plan.

Letters sighted by Citi Business News to authorities cautioned that any move by government not to go by the agreement will have dire consequences on the transparency and equitable allocation of funds to the banks and also derail the restructuring objectives and the significant efforts made so far by all parties involved.

Citi Business News has learnt the Finance Ministry is expected to disburse 400 million cedis this month [September] to clear a large chunk of the debt, but sources familiar with the development say the cash may not go through the SPV as agreed by stakeholders.

According to sources within the Ministry of Finance, Hon. Cassiel Ato Forson, the deputy minister in charge of the ministry has been given the charge to ensure the agreed process between the parties and government is carried through.

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By: Norvan Acquah – Hayford/citibusinessnews.com/Ghana

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