Dollar crunch ‘cost Tanzania oil firms Sh300 billion’

Dar es Salaam. Oil marketing companies posted more than Sh300 billion in losses over the past year due to the dollar crisis, The Citizenhas learnt.

Consolidated data revealed exclusively to this newspaper shows that 22 oil marketing companies reported losses amounting to Sh301.55 billion since February 2023.

Tanzania Association of Oil Marketing Companies (Taomac) executive director Raphael Mgaya said the firms have also been incurring losses on post-import loans interest and charges on overdrafts.

“There are also swaps and other financial instruments crafted by banks, ostensibly to help oil marketing companies out of the forex shortage crisis, with the lenders making a killing in the process,” he added.

“These losses have particularly accumulated since February 2023 to date due to the fact that there has been under-pricing of petroleum products. These losses are therefore unsustainable.”

Mr Mgaya told The Citizenthat some oil marketing companies have been forced to cut jobs to ensure their long-term survival.

“As oil markers’ financial muscle shrinks, the consumer is exposed to looming fuel shortages, which usually come with significantly higher prices,” he said.

“On the other hand, as workers are being laid off, the government is losing revenue through PAYE. More importantly, in a country such as ours, where youth unemployment is still big problem, the loss of jobs is nothing short of a societal catastrophe.”

Mr Mgaya added that industry stakeholders, including Taomac, are calling for regulatory interventions to prevent further damage to the economy.

Bank of Tanzania governor Emmanuel Tutuba told The Citizen earlier this month that the government has taken measures to remedy the situation in 2024 following last year’s crisis.

“We have taken comprehensive measures that will ensure that the availability of dollars will be much better in 2024 compared to 2023,” he said.

Mr Tutuba added that Tanzania currently has about $5 billion in foreign exchange reserves that are enough for at least five months’ imports of goods and services.

“To reduce the expenditure of dollars on imports of commodities that can be produced locally, such as palm oil and sunflower oil, the government has developed improved seed varieties that are aimed at ramping up the production of the relevant crops and ultimately slashing cooking oil imports,” he said.

This is in addition to several measures that were announced last August, including gold purchases by the government and the sale of large amounts of dollars to banks at reduced prices to push down exchange rates and stimulate the forex business.