Oil marketers count losses as dollar rate crunch bites

Dar es Salaam. Frustrations around the dollar supply have continued to emerge, with oil marketing companies revealing how they battle the shortage of foreign currency at their own cost.

A leaked letter shows that the oil suppliers, through their association, were seeking an audience with the Ministry of Energy to discuss the situation in which the companies said they were selling fuel at a loss.

The oil marketers said they have been buying dollars at a higher rate than that of the central bank, even contrary to the rate displayed by commercial banks.

They raised concerns over the sustainability of the business, revealing that they are currently grappling with significant losses attributed to a scarcity of dollars and the proliferation of the black market.

According to the letter dated February 8, 2024, the oil companies highlighted that the cap prices issued by the Energy and Water Utilities Regulatory Authority (Ewura) on February 7, 2024, quoted an exchange rate of Sh2,574 per dollar, but it did not reflect the prevailing market conditions.

“Oil marketing companies purchase forex at a premium, i.e. when they place orders for forex with commercial banks, they are given the Bank of Tanzania (BoT) rate plus a premium of up to Sh200 per dollar,” the letter reads.

“To conceal this malpractice, the commercial banks ensure that the amount of dollars purchased is only recorded with a BoT forex rate while the premium is not recorded and either paid via a separate account or they paid in cash,” it adds.

To mitigate losses and ensure a steady supply of petroleum products, the companies have been exploring alternative avenues for currency acquisition, which charge up to Sh2,800 a dollar.

The transactions are unacknowledged by Ewura, as the parallel market operates outside official channels.

“That is why, this month, only $30 million has been used to calculate the average forex rate, as opposed to the aggregate market demand of $250 million,” the letter reads.

Ministry of Energy permanent secretary Felchesmi Mramba said they have received the letter and the ministry is currently working to address the concerns.

“For now, let me just answer briefly that we are working on it,” he told The Citizen.

However, the Bank of Tanzania (BoT) Governor, Mr Emmanuel Tutuba, told Mwananchi yesterday that what the banking sector regulator does is control the interbank rates.

Since Tanzania adopted the free market economy in 1992 and after the start of implementation in 1994, the BoT has not intervened in the retail market.

It does so on the belief that what happens with the interbank rate will set the tone for what should happen in the retail market.

“But as the BoT, we do not intervene in the retail market. What people are complaining about is the retail rates, which are governed by market forces in line with the agreement between the buyer and the seller,” said Mr Tutuba. Like many other businesses, most petroleum marketers import their products through loans obtained through an arrangement known as a Letter of Credit (LC) from commercial banks.