The Ministry of Finance has confirmed paying off the debts that were owed to the bulk oil distribution companies (BDCs).
However, it said negotiations between the oil traders and the government led to the country saving about GH¢324.57 million and about $552.83 million from the exercise.
In a statement that detailed the processes leading to the final payment of the last tranche of the debts in January this year, the ministry said what was initially supposed to cost the country GH¢839.98 million and $318.79 million was later reduced to GH¢515.51 and $118.82 million respectively after series of negotiations and validation exercises commissioned by the government.
It said the savings resulted from the government’s ability to validate claims by the BDCs below what were initially quoted, after which payments were effected through the ESLA Bond programme
The statement followed a Daily Graphic enquiry on a February 10 announcement by the Chamber of Bulk Oil Distributors (CBOD) that the government had successfully paid off the debt of BDCs that had accumulated between 2011 and 2015.
The statement said the payments covered forex loss under-recovery (FLUR) – the loss incurred by BDCs as a result of the differentials between the GH¢/USD$ foreign exchange rates determined by the National Petroleum Authority (NPA) for the pump prices and the rates at which the forex rates were supplied by the Bank of Ghana on behalf of the Government of Ghana (GoG); the forex loss under-recovery interest (FLURI), which refers to the interest accrued on the delayed payments of forex loss under-recoveries; and the real value factor (RVF), which refers to the interest accrued on the delayed payments of price under-recoveries.
Demands of CBOD
Tracing the processes that led to the payment, the statement said in February 2017, the CBOD wrote to the ministry to demand payment for $140.61 million as FLUR for the period 2011 to 2015 that was due and had been validated by Ernst & Young (EY), agreed and signed off by the previous administration but had not yet been paid.
The chamber, it said, also demanded payment for additional FLUR amounting to $44.83 million “due for the period 2011 to 2013, claimed but yet to be validated” and an RVF amount of GH¢541.06 million, also yet to be validated.
The final demand, it said, was a FLURI amount of $108.56 million, which was yet to be validated
It added that the ministry then commissioned a five-member committee with industrial and practical experience within the petroleum downstream sector to determine if the claims for RVF and FLURI were worth considering or should be disregarded.
The committee was to also advise the ministry on the validity of the RVF and FLURI claims, it said, but explained that after its work, the “committee concluded in their report that given the nature of the downstream business operations and its associated risks, as well as the government’s policy on fuel subsidy at the time, the grounds for claims for RVF and FLURI were genuine and advised the government to validate the amounts and settle”.
“These claims were settled in full with the proceeds from ESLA bonds under ESLA PLC, issued in June 2019 and in January 2020.
“As such, the government has now settled in total all the legacy debt — which is not Central Government debt, due the BDCs it inherited through ESLA PLC.
“This initiative has helped in reducing the non-performing loans (NPLs) in the banking sector contracted by the BDCs, as well as strengthened the operations of the BDCs,” the statement added.
The ministry, thus, expressed its appreciation to Legacy Bonds Limited, the CBOD, the partner banks and all other stakeholders for their cooperation and support.