News Guide Africa

Tag: G4O

  • ‘Gold for Oil’ deal suffers critical scrutiny…gov’t told to take a second look at it

    Adnan Adams Mohammed

     

    The ‘Gold for Oil’ policy has faced critical scrutiny by stakeholders challenging the government’s white wash claims that the policy as implemented has been a success.

     

    Newest to add his voice to the critics is an Energy Strategist who is advising government to take a second look at the ‘Gold for Oil’ Programme as it has not impacted on prices of petroleum products at the pumps.

     

    Last week, some Oil Marketing Companies withdrew from the programme due to unresolved concerns. The government’s gold for oil policy as a government strategy was borne out of the country becoming strapped of foreign exchange. The policy is to enable the government directly exchange gold for oil while avoiding to use foreign currency, particularly the dollar, as a means to control the country’s inflation. The Strategist, who believes the intended purpose of the policy has not been achieved, wants a review of the programme.

     

    “The problem is that it’s not being able to stabilise the cedi that we want to stabilise. At best maybe it has minimised the depreciation rate and that’s not what we wanted”, Dr Yussif Sulemana pointed out to the managers of the economy.

     

    “It’s quite unfortunate and the champions of the programme will have to relook at it and look at the successes and weigh against what we are trading on”.

     

    He quizzed “Are we ready to disturb these institutions [OMCs] just to stabilise the cedi that we are not able to have a firm handle on?”

     

    “At this point in time and in that case, I think the programme needs to be reviewed and if it cannot be reviewed, then we have to just advise ourselves”, he added.

     

    Also, some Civil Society Organisations (CSOs) in the energy sector have challenged government to publish the names of third-party dealers involved in the ‘Gold for Oil’ programme.

     

    The call comes after some Oil Marketing Companies pulled out of the programme due to unresolved concerns.

     

    The Ghana Chamber of Bulk Oil Distributors has announced that some of its members are also unhappy with concerns raised on the implementation of the programme.

     

    Energy Analyst, and Co-Chair of the Ghana Extractive Industries Transparency Initiative, Dr Steve Manteaw said the government must publish the names of all intermediary dealers in the programme to promote transparency.

     

    He added that the current mode of the programme creates room for some operators to take advantage of the system.

     

    “There is no disclosure in terms of who is financing the domestic gold purchasing in this transaction. We are going to resort to the services of a third party. For instance, who is selling Ghana’s gold? if it’s a broker then the broker services have to be disclosed”.

     

    Dr Manteaw stated lack of transparency will encourage corrupt acts that may defeat the purpose of the programme.

     

    “I think it’s fair to ask questions. How much is the broker being paid and how does it affect what we receive as a country in terms of reserves”, he quizzed.

     

    In recent publication, a key player in the extractive industry, the Chairman of Ghana Chamber of Bulk Oil Distributors, Dr. Patrick Kwaku Ofori, says the government’s gold for oil policy has cornered bulk oil distributors working in the country.

     

    Noting that, none of the BDCs had anticipated such a policy as it places them in a tight spot in competition against the government.

     

    Dr. Ofori, speaking in an interview indicated that, the policy will have a toll on the regulators’ revenue generation, “because none of the BDCs or those BDCs who have paid their license fee did not necessarily pay for a license fee to be cornered a percentage of the matter.”

     

    “They want to be given the right climate to conduct their business. And also don’t forget these private entities also employ Ghanaians and they also pay their taxes.

     

    “So it’s a bit of a tricky situation there, and the programme obviously impacted on private sector participation judging from how private sector can also assess the proceeds of the revenue coming from the gold purchases.”

     

    He however suggested that government could change their policy to allow private sector engagement.

     

    “But if government intends to change their policy with regards to the gold for oil and allow private sector participation and say that ‘well as a country, all our revenue that we’re going to generate from maybe gold export, we’re going to use maybe a percentage of it to finance our refined product importation .

     

    “And by so doing, either through the Central Bank reactivating the forex option so that both the private sector and the public entities who are interested in importing refined products can go through those competitive processes to be able to have the product.’”

     

    He also stated that another option was for the Bank of Ghana to surrender all gold proceeds and revenue in a way to guarantee forex availability to the commercial banks for all importers to have access to them.

     

     

     

     

  • Gold-for-oil deal: stakeholders call for improve transparency

    Adnan Adams Mohammed

     

    A key player in the extractive industry has called for the immediate publication of the policy document regarding the gold-for-oil policy to ensure transparency of the agreement’s terms and conditions.

     

    Dr. Steve Manteaw, a policy analyst with the ISODEC believes that providing comprehensive details about the policy is essential to dispel any suspicions and ensure transparency.

     

    The government’s gold for oil policy was borne out of the country becoming strapped of foreign exchange. The policy is to enable the government directly exchange gold for oil while avoiding to use foreign currency, particularly the dollar, as a means to control the country’s inflation. But, the analyst further believes that revealing the terms of the agreement can instill public confidence in the gold-for-oil policy.

     

    “We don’t know how Ghana procures its petroleum products and at what cost, nor do we know the cost of facilitating the gold-for-oil program. All of these things need to be disclosed so that we can hold our duty-bearers accountable. We want to see a comprehensive gold-for-oil policy because, as it stands, there is none. All we have seen are headline pronouncements”, Dr Manteaw made these remarks during the launch of the 2020 Ghana Extractive Industries Transparency Initiative report.

     

    “There is no blueprint document, and Parliament must take an interest in this. They must see the policy document, interrogate it, and see how best it serves the national interest.”

     

    However, the Chairman of Ghana Chamber of Bulk Oil Distributors, Dr. Patrick Kwaku Ofori, says the government’s gold for oil policy has cornered bulk oil distributors working in the country.

     

    Noting that, none of the BDCs had anticipated such a policy as it places them in a tight spot in competition against the government.

     

    Dr. Ofori, speaking in an interview indicated that, the policy will have a toll on the regulators’ revenue generation, “because none of the BDCs or those BDCs who have paid their license fee did not necessarily pay for a license fee to be cornered a percentage of the matter.”

     

    “They want to be given the right climate to conduct their business. And also don’t forget these private entities also employ Ghanaians and they also pay their taxes.

     

    “So it’s a bit of a tricky situation there, and the programme obviously impacted on private sector participation judging from how private sector can also assess the proceeds of the revenue coming from the gold purchases.”

     

    He however suggested that government could change their policy to allow private sector engagement.

     

    “But if government intends to change their policy with regards to the gold for oil and allow private sector participation and say that ‘well as a country, all our revenue that we’re going to generate from maybe gold export, we’re going to use maybe a percentage of it to finance our refined product importation .

     

    “And by so doing, either through the Central Bank reactivating the forex option so that both the private sector and the public entities who are interested in importing refined products can go through those competitive processes to be able to have the product.’”

     

    He also stated that another option was for the Bank of Ghana to surrender all gold proceeds and revenue in a way to guarantee forex availability to the commercial banks for all importers to have access to them.

     

     

  • NPA and AOMCs agree on criteria to share G4O consignment

    NPA and AOMCs agree on criteria to share G4O consignment

    Adnan Adams Mohammed

     

    The National Petroleum Authority (NPA) in consultation with the Association of Oil Marketing Companies (AOMCs) has devised an effective method to share arriving consignments of refined petroleum products trading under the Gold for Oil (G4O) programme.

     

    The two parties agreed that, for the gains (reduced fuel prices) of the programme to be felt across the country, OMCs with less than 45 sales outlets will not receive share of the consignments.

     

    The new method agreed is to also address concerns of the AOMCs regarding a lack of clarity regarding the allocation of products supplied under the programme to its members. The sharing criteria take into consideration the top 25 OMCs that distributed petrol and diesel in 2022 with not less than 45 retail outlets across the country.

     

    “Better results are expected as more G4O cargoes arrive”, Dr Mustapha Abdul-Hamid, CEO of NPA  said when speaking at the meet-the-press series in Accra last week.

     

    The NPA Boss noted that, the country had received three cargoes so far, comprising 41,000 metric tonnes (MT) of diesel in January, and another 40,000MT of diesel and 35,000MT of petrol which has just arrived and being discharged.

     

    The implementation of the  G4O has slightly lowered the prices of petroleum products and reduced forex risk.

     

    The meet-the-press under the auspices of the Ministry of Information that featured the NPA, focused on developments in the downstream petroleum industry on the theme: “Petroleum Downstream: Retrospect and Prospect.”

     

    Tracing the situation before the implementation of the G4O programme, Dr Abdul-Hamid said average monthly petroleum product import bill ranged from $350 million to $400 million.

     

    He said the petroleum downstream dollar demand accounted for 20 percent of national demand.

     

    The NPA Boss noted that Bank of Ghana (BoG) commenced a special exchange rate auction programme for the petroleum downstream in April 2022, and indicated that the special auction programme could not meet 100 percent of forex demand in the country.

     

    “Inadequacy of BoG supply pushes BIDECs to speculate forex rates arbitrarily based on proposed rates from commercial banks”, he said, and explained that the gold payment was mooted as a solution to the pressure that petroleum downstream put on the cedi.

     

    Dr. Abdul-Hamid said the NPA regulates G40 products prices on the interim (Ex-ref price and Ex-pump prices).

     

    He stated that the Authority had intensified price monitoring activities with penalties for defaulting service providers.

     

    Touching on activities undertaken to ensure product quality and integrity, the NPA Boss mentioned the supply of low sulphur fuels (cleaner fuels), a maximum of 50ppm for imports and a maximum of 1500ppm for domestic production.

     

    The NPA also undertakes periodic petroleum product monitoring exercises, conducts fuel marker monitoring and quality monitoring of fuel standards (Quality Control) including checking of water in fuel and collaborates with security agencies to prevent illegal imports, exports and product dumping.

     

    Dr Abdul-Hamid said the Authority used technology (Electronic Cargo Tracking System (ECTS), National Fuel Monitoring System (NFMS) and the Automatic Tank Gauge system) to ensure intended delivery of petroleum products along the petroleum downstream value chain.

     

    He mentioned the revocation of licenses and publication of the names of defaulting Petroleum Service Providers (PSPs) and Laycans allocation and monitoring to ensure adequate supply as some of the activities undertaken to ensure order in the downstream petroleum industry.

  • NPA ordered to be effective in monitoring of OMCs pricing under G4O

    NPA ordered to be effective in monitoring of OMCs pricing under G4O

    Adnan Adams Mohammed

     

    The ministry of energy has bemoaned loose regulatory monitoring of Oil Marketing Companies (OMCs) which has benefited under the Gold for Oil (G4O)first consignment.

     

    A deputy minister at the ministry has revealed that, about 11 OMCs which received the cheaper oil under the new arrangement  did not reduce their pump price.

     

    The ministry is taken aback with the situation, indicating that had been a setback on the policy’s intent to improve the supply of the commodity, positively influence price change, and shore up the exchange reserve of the country. The deputy minister therefore called on the National Petroleum Authority (NPA) to be up and doing in its monitoring role to ensure that the policy intent is achieved.

     

    “National Petroleum Authority (NPA) has to be very rigorous in ensuring that the framework that will be published to govern the pricing of the product is a strong framework”, Dr Amin Adam Mohammed, the Deputy Minister for Energy said in an interview.

     

    “And they have to ensure that they are able to monitor all those OMCs that will take the product to ensure they reflect in their pump prices.”

     

    Ghana piloted the Gold for Oil policy with the delivery of 41,000 metric tonnes from the United Arab Emirates (UAE), which arrived at the Tema port on Sunday, January 15, 2023.

     

    However, Mr Duncan Amoah, the Executive Secretary of the Chamber of Petroleum Consumers Ghana (COPEC), said it was encouraging to have more than 50 percent of OMC reducing their prices under the policy.

     

    He, called for “purposeful planning” with a clear objective of either ensuring fuel security or reduction in pump prices. That, he said, would require a constant supply of the commodity on the market to meet the demands.

     

    “You must be focused and know that 41 000 metric tonnes might not do the trick. So, If I am bringing 41, another cargo must come at 60, and must come at 70, to be able to contain the market demand.

     

    “If you are going to throw a little in the ocean and expect a ripple effect, you might not get it,” he said.

     

    The prices of fuel in Ghana are mainly determined by the world market price of the commodity, cedi depreciation, taxes and levies. As of November 2021, the government had imposed 12 different taxes and levies on petroleum products while the Cedi had declined by more than 55 per cent between January and October 2022.

     

    Mr Amoah urged the Bank to Ghana (BOG) to focus on addressing the volatility of the Cedi by, “using the gold to back the Cedi so that it can have a certain semblance of stability for trading.

     

    Consequently, Mr Alex Mould, a former Chief Executive Officer (CEO) of the Ghana National Petroleum Corporation (GNPC), said the Gold-for-Oil policy was a smokescreen by some players to enter and control the oil import and gold export market using government apparatus.

     

    “People with the license to these things are not happy because they can be eliminated,” he stated.

  • GHEITI cast shadows over G4O… makes recommendations in new report

     

    Adnan Adams Mohammed

     

    The Ghana’s version of Extractive Industry Transparency Initiative (GHEITI) has cast shadow for the government’s newest ‘game changer’ policy, Gold for Oil (G4O).

     

    In the 2020 report of GHEITI, it raised a number of concerns and observations about the G4O policy which make the ideation and implementation looks poorly thought through. It says the policy implementation lacked wider stakeholder consultation while worsening issues of smuggling among others.

     

    The government has been looking for a sustainable way to tame the excess demand of foreign exchange by importers, especially for the Bulk Oil Distribution Companies (BDCs). Although, government has acquired the first consignment of 40,000 metric tonnes of oil under the deal and it is optimistic that this would cushion fuel consumers. Yet, many experts in the extractive industry are yet to understand the impact of the whole deal.

     

    “There had not been any disclosure on the buyer and the supplier selection criteria for the sale of gold and the purchase of refined petroleum products, respectively”, the 2020 GHEITI report released last week observed with worry. “Similarly, there has not been any disclosure on the pricing method (such as spot, futures, discount, margins etc.) for the gold sales and oil purchases.”

     

    Other concerns raised included: “There is no clarity whether or not the purchases from ASM will be refined before they are sold. This has implication for the realisable value of gold sold.

     

    “It is also not clear how the overall transaction cost under the programme would be covered; The Government did not indicate how it will raise money for the gold purchases, whether through loan syndication, Central Bank financing or government budgetary allocation; If the directive is strictly enforced, ASM gold supplies will not be available to domestic jewellery manufacturers anymore, threatening their livelihoods; The directive will centralise gold purchases from the ASM subsector, similar to what pertains in the cocoa sector, and give the country greater control over its gold exports.”

     

    Under the Gold for Oil programme, government plans to purchase the country’s total ASM gold production, and a portion of large-scale production in Cedis. The arrangement is intended to secure reliable and regular sources of affordable petroleum products for the country.

     

    This is expected to ease the demand pressure for US Dollars, which has led to a heavy depreciation of the local currency.

     

    Consequently, GHEITI’s MSG has reviewed the proposal and made the following recommendations to help make the policy work better: “Broader consultations are encouraged to identify the potential impact of the programme on diverse stakeholders, and to address same ahead of implementation. For instance, some ASM actors engage in pseudo forward sales with off-takers, including foreigners, who expect to receive dore in exchange for forex. This situation could increase the incidence of smuggling;

     

    “Government is also encouraged to subject the policy to periodic review and further stakeholder consultations to adjust and improve implementation.

     

    “Government should prioritise building up its gold reserves as a mechanism for dealing with the impact of the volatility associated with gold prices by predominantly stock piling gold when prices are low and selling when prices are high” and

     

    “Additionally, government could enhance its gold stockpile by exercising the option of taking

    royalty in-kind, in line with the provisions of the Development Agreements with Newmont,

    AngloGold and Gold Fields.”

  • Gold for Oil policy suffers criticism…described as “zero-sum-game’

    Gold for Oil policy suffers criticism…described as “zero-sum-game’

    Adnan Adams Mohammed

    Government’s touted ‘game changer’ policy, Gold for Oil, intended to stem the exchange rate escalation has been receiving criticism from the energy industry experts as to the viability of the policy.

    The policy, as indicated by government is already receiving attention from global fuel traders and expecting its first consignment in second week of this month, January 2023.

    But the former National Petroleum Authority boss has described the deal as a ‘zero sum game’.

    The energy and finance analyst justified his comment that, from the way Bank of Ghana is redirecting the gold flows from the Small Scale Mining Companies into the banking sector directly, he do not see exports increasing nor imports decreasing and this will add up nothing to the current fuel trade pattern and its effect on the forex reserves.

    “Unless we put some sort of policy to curb under-used imports or increase taxes on non-essential imports”, Alex Mould, who is also a former GNPC Boss and Executive Director with Standard Chartered Bank suggested in an interview last week.

    He explained the ‘zero sum game’ description of the policy as that; “The trader who import products into the market and the main ones who buy gold from the Small Scale Mining Companies (SSMC) (that is, Melcoms and Palaces etc) were using the Cedis obtained from their local sales to buy Gold directly or indirectly and exporting it and obtaining the forex directly and not through the banking system. So the gold exports were going to these traders directly or indirectly and not in the hands of BoG or the Commercial banks.

    So, now that Bank of Ghana is redirecting the gold flows from the small scale mining companies into the banking sector directly through bank of Ghana.

    “The way I see it it’s a Zero-sum game because i do not see the exports going to increase nor do I see  imports decreasing unless we put some sort of policy to curb underused imports or increase taxes on non-essential imports.”

    “What we have told BoG  to do was to allocate some foreign exchange from our exports of gold, timber and oil which passes through Bank of Ghana and some of the commercial banks directly to the essential imports of the country, which include petroleum products building materials for industries and medical equipment and consumables as well as education consumables.

    “BoG never did that fully, although some partially done in the 2010-2016 era.

    The government had been working on the new policy to buy oil products with gold rather than US dollar reserves for the past few weeks. The move, announced earlier by Dr Bawumia, was meant to tackle dwindling foreign currency reserves coupled with demand for dollars by oil importers, which is weakening the local cedi and increasing living costs.

    Ghana’s Gross International Reserves stood at around US$6.6bn at the end of September 2022, equating to less than three months of imports cover. That is down from around US$9.7bn at the end of last year, according to BoG.

    If implemented as planned for the first quarter of 2023, the new policy “will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency”, Dr Bawumia said a few weeks ago.

    Using gold would prevent the exchange rate from directly impacting on fuel or utility prices as domestic sellers would no longer need foreign exchange to import oil products, he explained.

    “The barter of gold for oil represents a major structural change,” he added.

    While countries sometimes trade oil for other goods or commodities, such deals typically involve an oil-producing nation receiving non-oil goods rather than the opposite. Ghana produces crude oil, but it has relied on imports for refined oil products since its only refinery was shut down after an explosion in 2017.

    Meanwhile, the Executive Director of African Center for Energy Policy (ACEP) is worried that, the policy might hand over control of gold and oil to politicians.

    “The structure presented as gold-for-oil only seeks to hand control of the gold and oil value chain to politicians. No other value can be deduced. It is obvious that if cheap oil comes to Ghana, other unknown factors will be responsible and not gold”, Benjamin Boakye indicated in a statement issued last week. “The government has still not been forthright about the cost of the structure to justify its competitiveness to the current private sector-led approach.”

    Mr Boakye also said the government agencies involved in the policy, the Bulk Oil Storage and Transportation (BOST), Tema Oil Refinery (TOR) and the Precious Minerals Marketing Company (PMMC), are historically poor performers in oil and gold-trading.

    In his view, “interventions of this magnitude should not leave people in doubt in the interest of good governance and assurance of the international community which has shown significant interest in Ghana’s gold for oil programme.”

    “The government also needs to be cautious and guided by the challenging context of state agencies in the oil and gold business because when these agencies make losses, it is the public that pays, and the energy sector is already inundated with debts because of similar trading abuses. There are no guarantees in the current structure that insulates the public from debt.”