The Chamber of Petroleum Consumers (COPEC) is urging local refineries to pay for crude oil in cedis instead of US dollars, warning that dollar payments could increase pressure on Ghana’s foreign exchange market and weaken the cedi.
The call comes as upstream oil producer Tullow Oil supplies crude oil to local refineries under an arrangement aimed at boosting domestic refining and reducing Ghana’s reliance on imported petroleum products.
Sentuo Oil Refinery received the first crude oil cargo under the arrangement earlier this year.
COPEC Executive Secretary Duncan Amoah believes payments in the local currency would be more practical because refineries sell their finished petroleum products on the Ghanaian market in cedis.
He said the payment arrangements must protect the commercial interests of crude oil producers, the state and local refineries while minimising pressure on foreign exchange demand.
“That the crude is being sold on a commercial arrangement basis is a good thing so that the Jubilee Partners do not lose, Tullow does not lose, the state Ghana does not also lose the expected revenue,” he said.
Mr Amoah, however, insists that crude oil purchases for domestic refining should be settled in cedis, Ghana’s legal tender.
“I am happy that Mr. President has already instructed the Energy Minister, the Finance Minister to ensure that these refineries are given a flexible trade term such that they can pay for the crude in the local currency,” he added.
He warned that requiring refineries to pay in dollars while earning revenue in cedis could force them to compete with other businesses for the limited foreign exchange available to finance imports.
“Don’t forget, whatever they refine and sell, they sell to the Ghanaian market in cedi. And so if you ask them to pay dollar, you are simply asking them to come back to the same market that doesn’t have enough dollars for the other importation space to crowd them out and further put pressure on the Cedi causing depreciation,” he argued.
The proposal comes amid efforts to strengthen Ghana’s domestic refining capacity and reduce dependence on imported petroleum products, which expose the country to international oil price fluctuations and foreign exchange pressures.
Allowing local refineries to pay for crude oil in cedis could reduce their direct demand for dollars.
However, the success of such an arrangement would depend on the terms agreed with crude suppliers and how payments would accommodate the foreign exchange needs of upstream producers and other parties involved.
