The central bank has changed the list of items imported to the country that are prioritised for foreign currency allocation from commercial banks. Inputs for edible oil production are included in the first tier alongside medicine, pharmaceutical manufacturing, and laboratory reagents. The National Bank of Ethiopia (NBE) issued a directive on December 1, 2021, tinkering with the list first developed in October last year.

The revised list officially reinstates petroleum products to top-priority status. The previous directive had downgraded fuel products to the second tier before the central bank issued a circular reversing the decision a few months later. Second priority items include inputs for agriculture (fertiliser, seeds, and pesticides) and manufacturing (raw materials and chemicals). The third priority category comprises 10 sectors, including education materials, manufacturing and agricultural machinery, and the repatriation of profits and dividends.

Commercial banks are mandated to allocate 15pc from half of their foreign currency reserves for all imports classified as priority essential goods. The decision put the previous threshold five percent higher. Items listed in the second and third priority categories get 40pc and 45pc, respectively, from half of the banks' foreign currency reserves.

“The inclusion of edible oil is in line with the need to stabilise the market,” Yenehasab Tadesse, director of foreign exchange monitoring and reserve management at the central bank.

Shemu Plc, a palm oil processing plant in Dire Dawa, is one of the beneficiaries of the new allocation rule. Although the facility can process 1,287tn of oil a day, it operates at less than half its capacity due to a shortage of inputs four years after launching operations. It is one of the five industrial-scale edible oil processing plants.

"We understand the foreign currency shortage in the country," said Theodros Tadesse, head of communications for Shemu Group. "The government is extending as much support as it can. We hope it gets better as situations improve.”

Shemu supplies its products to select regions, including Dire Dawa and Addis Abeba cities and the Harari and Oromia regional states. It also sells to institutions like the Federal Police Commission and the Ethiopian Defense Forces. Shemu and other edible oil plants sourced forex through government channels, through approvals from the Ministry of Trade & Regional Integration. The companies have not been placing requests before commercial banks.

Officials of the Trade Ministry had submitted a request before the central bank to secure 600 million dollars allocated to edible oil manufacturers. The Ethiopian Edible Oil Manufacturer Industries Association has been lobbying the central bank to include the industry in the top priority list of imported items. The Association submitted a letter of appeal to the central bank six months ago, pleading with the regulators to include inputs for edible oil manufacturing in the priority list.

As the production of oilseeds cannot keep up with manufacturing demand, the processing plants are forced to source crude oil from abroad, according to Addise Garkabo, general manager of the Association, which represents many of the 232 small and medium palm oil processing plants.

“The move would help stabilise the market and allow the plants to create more jobs as they kick up their production capacity,” he told Fortune.