Thumbs up, BoG for guaranteed forex supply to BDCs

In the last couple of weeks, the Bank of Ghana announced a raft of measures to help check rising inflation and mop up excess liquidity in the system.

It further took a decisive decision to introduce a foreign exchange forward auction for Bulk Oil Distributing Companies (BDCs) in a move meant to help stabilise fuel prices at the pumps in the coming weeks and beyond.

The bespoke multiple-price forward FX auctions are 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.

The Graphic Business finds this intervention not only apt but refreshing in view of the effect of the rising fuel prices at the pumps on the general cost of living.

To us, the bank has demonstrated its ability as the sole entity in charge of monetary policy to intervene in the market when necessary to prevent further disruptions to economic activities.

In many instances, measures taken by the government and its agencies to help address teething problems have been blatantly abused, rendering those measures ineffective in the medium to long term.

We are, however, happy to note that based on previous experiences, the BoG was quick to outline a systematic process in order to ensure that the BDCs follow through the various arrangements made.

For instance, regarding the publication of Foreign Exchange Auction Calendar, the bank explained that it would publish an auction target incorporating inputs received from the National Petroleum Authority (NPA) for the foreign exchange forwards on a bi-weekly basis.

It further noted that the target would be published four days preceding the pricing window for the downstream sector on the bank’s website to enable market participants to plan adequately while the announcement shall list the date and time, auction volume target, settlement and other relevant information.

The paper believes that the bank has clearly demonstrated good faith, having listened to the requests by the BDCs for that intervention.

Against this background, the Graphic Business would want to urge the BDCs to play their role by ensuring that participation in the auction is restricted to only actual members of the NPA through their authorised licensed foreign exchange dealing banks.

Without any shred of doubt, we are hopeful that the persistent rise in the prices of petroleum products at the pumps in the last couple of months will now be a thing of the past as rightly pledged by the Chief Executive Officer of the Chamber of Bulk Oil Distributors (CBOD), Senyo Hosi (see front page story).

In what is expected to be a major welcome piece of news to the public and the business community, it will also help to restore market certainty, check inflation and invariably, positively impact the disposable income of workers.

The BDCs have also indicated that the move by the central bank would help minimise currency speculations and improve the credit confidence of their suppliers.

The Graphic Business would want to take this opportunity to entreat all the players, the BoG and the BDCs, to demonstrate good faith and follow through the laid down procedures to ensure that the intended purpose of the intervention is achieved.

We need to restore confidence in the economy by checking inflation and halting speculators from having a field day. As indicated earlier, that can only be achieved when all play their role.