On the back of an exclusive forex forward auction guideline for Bulk Oil Distribution Companies by the Bank of Ghana (BoG), market analysts have expressed much optimism, as this brings some additional layer of respite to the weakening of the Cedi against the US dollar.
Senior Analyst with Databank, Courage Kingsley Martey, in an interview with the B&FT, said the initiative is a good move by the Bank of Ghana, following calls by stakeholders in the petroleum sector for such exclusive auction system for Bulk Oil Distribution Companies (BDCs).
“Two important things you pick from the guidelines for the auctions and allocation include the BOG ensuring that commercial banks must pass exactly the forward exchange rate allotted to the BDCs without the banks adding their own premiums, as they would have done under the regular forward auctions.
This system would help to cut the FX pressures and also reduce the upward pressure on ex-pump prices, ultimately being positive for containing inflationary pressures,” Mr. Martey said.
According to the BoG, this bespoke multiple price forward FX auction 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.
In addition, the Senior Analyst expressed the view that BoG’s insistence on BDCs proof of contact within the specified pricing window and depositing the flows into their bank account for monitoring is very important.
“This would help the Bank of Ghana cut off some frivolous demand that would have come through at the regular FX forward auctions. This is also a positive approach adopted by the Bank of Ghana, which is good for the FX Outlook,” he said.
During the maiden auction on March 30, 2022, the central bank sold a total of about US$104.86million above the auction target of US$100million at a rate of GH¢7.39 to the American greenback.
From the bank’s summary of macroeconomic and financial data, oil imports into the country increased to US$609.7million in February from US$296.4million in January of 2022. So far, a total of US$906.1million of oil products have been imported into the country as of February 2022.
Senior Investment Analyst at OctaneDC Limited, Kwadwo Acheampong, also in an interview with the B&FT, noted that the central bank can sustain this initiative in the foreseeable future, ensuring BDCs of the availability of adequate FX as and when they need the dollars.
“On sustainability, it looks like the bank has deep pockets for now. This is because it has not announced any major change in its programmes, especially its gold purchase programme,” he said.
Reserves are still, at least, worth 4 months of imports. Gold, cocoa and oil prices are still high, so these will sustain reserves for a while, about 6 months, even if no major inflows (like Eurobond or cocoa syndicated loan receipts) are received,” he noted.