Fortune News | Aug 08,2020
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.
The banking industry appears to welcome the news. The revised procedure requires importers of non-priority goods to deposit half the amount of the import value in blocked accounts. According to a senior executive at a private commercial bank, this can help filter out importers who submit proforma invoices to get ahead of the application queue.
Major difficulties noticed in the revised forex allocation rules are operational issues in the delay of forex approval and the need to control import prices, according to Yenehasab.
Commercial banks bought 42.7 million dollars in the last quarter of last year, a sharp fall by 53pc compared to the previous year's period, impacted mainly by the COVID-19 pandemic. They sold 17.3 million dollars over the same period, surging by 108.7pc.
"This has to do with the length of the queues," she said.
Officials at the central bank have changed the number of imported items and the approval process for requests to change products. Price adjustments above five percent of the import value were unacceptable in the previous regulation. However, the revised directive allows the president of a commercial bank to approve an adjustment considering the changes in the international market supported by data.
Making price adjustments justifiable due to fluctuations in the international market is reasonable, according to the executive of the private bank.
"It would help address the complaints from importers," said the executive.
The revised directive will enable changes in the items listed in the proforma invoice when forex approval takes more than six months for non-priority and three months for priority sectors. These were requests denied. This was part of the problem, according to the bank executive. As demands in the domestic market shift while forex requests are processed, importers should be allowed to change the volume of goods they import without affecting the aggregate price, he said.
"It has no significant effect on the operations of banks," said the executive.
Banks operate under a strict forex allocation quota, and the central bank is supervising closely, said Yenehasab.
PUBLISHED ON Dec 04,2021 [ VOL 22 , NO 1127]
Fortune News | Aug 08,2020
Radar | Apr 16,2022
Fortune News | Apr 13,2020
Fortune News | Nov 30,2019
Fortune News | Feb 23,2019
Fortune News | Jan 25,2020
Fortune News | Mar 19,2022
Radar | Nov 06,2021
Fortune News | Jun 18,2022
Radar | May 02,2020
November 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
November 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
October 16 , 2021 . By HAWI DADHI
Residing in a country with no capital market, an organised marketplace for trading se...
August 28 , 2021 . By HAWI DADHI
The streets of Addis Abeba are as varied as they are many, although too many of them have yet to be named. From the narrow alleyways of the...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country’s most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or tw...
June 25 , 2022
It is not the best of times to be in charge of governance in Ethiopia, whether at the...
June 18 , 2022
Some of Ethiopia's economic policymakers may take solace from realising that inflatio...
June 11 , 2022
The stereotype many people have of parliamentarians is as clueless seat fillers who exist to rubber stamp legislative bi...
June 4 , 2022
It was an institution confident in its mission, capabilities and progress that was on...
PM Abiy Ahmed (PhD) at a Gala Dinner Called for the Awarding of the Félix Houphouët-Boigny Peace Prize
May 6 , 2019
Last year, I met a young and charming medical doctor through a mutual friend. Our friendship quickly grew. She told me about her engagement...
Some live in a distant universe where they are oblivious to norms. There are unspoken rules. For instance, if two friends dine together, unl...
Or see contact page