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BusinessGov’ts forex allocation draws ire from edible oil processors

Gov’ts forex allocation draws ire from edible oil processors

Local edible oil processors air grievances over what they perceive as the government’s improper allocation of foreign currency, which they claim exhibits bias against domestic processors.

The lack of access to foreign currency for importing crude oil has rendered local processors idle, while the government channels these funds towards importing finalized edible oil products.

Gov’ts forex allocation draws ire from edible oil processors | The Reporter | #1 Latest Ethiopian News Today

On October 20, 2023, the Ethiopian Edible Oil Manufacturing Industries Association penned a letter addressed to the Ministry of Finance, expressing deep concerns and emphasizing the imminent risk faced by local processors.

As an umbrella organization representing 232 edible oil industries of varying scales, the Association conveyed its discontent with the unfolding circumstances.

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The letter stated: “Local processors have been suffering due to a lack of hard currency to import crude oil. In contrast, the government is allocating millions of dollars and providing guarantees to the Commercial Bank of Ethiopia, enabling the Ethiopian Industrial Inputs Development Enterprise to import finalized edible oil products.”

Due to the scarcity of crude oil as a raw material, local industries are compelled to halt production, according to the letter. “This action undermines the contribution of local industries to local self-sufficiency and job creation.”

After outlining the challenges faced by the sector, the letter urgently requested the Ministry of Finance to allocate hard currency to enable local edible oil processors import crude oil and resume productions.

It has been over one year since local processors accessed hard currency allocation. Based on Ministry of Trade and Regional Integration (MoTRI) recommendation, the National Bank of Ethiopia (NBE) approved a USD 100 million allocation in September 2022, intended to be shared among Shemu Plc, Hamaressa Edible Oil SC, and Phibela, owned by Belayneh Kinde.

However, only 50 percent of this allocation has been disbursed. Of the 50 million dollar disbursement, Phibela accessed 20 million dollar, while Shemu 13.5 million dollar, Hamaressa 4.5 million dollar, Al-Impex 9.7 million dollar, and Gifti Foods 1.8 million dollar.

Assuming these four big processors utilize 40 percent of their installed capacity, they need 932 million dollar annually to import the crude oil, according to data from MoTRI. This enables the four to produce 892,000 metric tons of edible oil annually, combined.

Under MoTRI’s 40percent capacity utilization assumption, last year, Phibela requested 327 million dollar, Shemu 325 million dollar, and Gifti and Al-Impex 140 million dollar each.

However, response to the 932 million dollar request remains nil, as government fails to allocate forex due to dwindling reserves in the past couple of years.

But on the other end, government lately announced that it has approved hard currency for the importation of finished cooking oil products.

Fetene Worku, the Industry and Products Procurement director at the Ethiopian Industrial Inputs Development Enterprise (EIIDE), revealed that the importation of 32 million liters of edible oil is already underway.

“An additional import of 16 million liters, initially planned for the previous fiscal year but delayed to the current year, has also begun to arrive in Ethiopia,” Fetene says.

EIIDE, a state-owned enterprise responsible for importing and distributing essential commodities such as edible oil and sugar, has been instructed by the government to import 10 million liters of palm oil and crude oil and distribute it to local processors in the current fiscal year.

However, managers of local processors and officials within the Association argue that the allocation of 10 million liters of crude oil is insignificant compared to the substantial amounts they require to operate at full capacity.

They assert that they are currently utilizing only a fraction of their installed capacities, a situation that is partly attributed to ongoing conflicts in the country.

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