A new policy by the Sierra Leone government has directed mining companies and other commercial interests that consume huge quantities of fuel to important for themselves from next month.
The government says all mining companies and other commercial end users enjoying fuel concessions have the options of either importing their own fuel or continue buying through the Oil Marketing Companies (OMCs) under a foreign currency denominated contract starting June 1.
The policy directive issued by the Ministry of Finance is part of the government’s approach to the ongoing crisis in the the petroleum downstream sector, which has been blamed on the ongoing war between Ukraine and Russia.
Russia, ranked as the world’s second largest oil producer, has come under multiple sanctions over its military operations in Ukraine, which western countries say was an aggression but which the Russians call preemptive action to protect its interests.
The war has had huge implications on the global market, especially manifested on the volatility of oil prices.
Russia is said to account for 53 percent of the petroleum products supplied to Sub Saharan Africa.
Countries like Sierra Leone have had to deal with incessant shortages, amid increase in prices which have had far reaching implication on the general standard of living.
The government and the OMCs have partly blamed the situation on the difficulty in accessing foreign currency to import petroleum products.
In a letter dated May 10 and addressed to the Minister of Trade and Industries and other relevant officials, Finance Minister Dr Dennis Vandi says the new policy was necessitated by the need to reduce pressure on the Bank of Sierra Leone (BSL) to provide foreign currency to the OMCs.
The statement says the move is part of “strategic decisions” being taken following discussions with stakeholders in the sector, including the petroleum importers themselves.
According to the ministry, as of the first quarter of 2022, forex support provided by BSL for the importation of petroleum products was estimated at US$24million. It adds that the Bank is currently considering a further support of US$35million.
Mining companies and other commercial end users are said to be the largest beneficiaries of the fuel procured, despite already benefiting from existing concessions.
Data provided by the ministry show that between January and March 2022, of the total uplift of diesel fuel of 62 million liters from OMCs, mining companies and other commercial users uplifted about 33 million liters, translating to 53 percent of the total.
“This implies that while government provides concessions to these agencies, they also enjoy non-pass-through cost as they are also heavily subsidized by the meagre resources of foreign support provided by the Bank of Sierra Leone with the aim of cushioning the retail market,” the statement reads in part. It warns that the situation could get serious with evidence that mining companies were stockpiling diesel fuel, thereby constraining supply to the ordinary citizens and small businesses.
