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BusinessCentral Bank directive frustrates oil companies

Central Bank directive frustrates oil companies

A directive issued by the National Bank of Ethiopia (NBE) requesting foreign oil companies engaged in oil and gas exploration and development projects in Ethiopia to open a foreign currency bank account in Ethiopia has frustrated international oil companies.   

The directive compels the oil companies to have a foreign currency bank account with Ethiopian commercial banks which will be supervised by the NBE. The companies can withdraw cash in local currency for their expenditure for the oil and gas projects.

“All purchase of goods and services will be transacted in line with foreign exchange directive of the National Bank of Ethiopia through the banking system,” NBE said.

Previously, the oil companies used to have offshore accounts and a local currency bank account in Ethiopia. The companies transfer foreign currency to their local accounts that they use to finance their oil and gas exploration projects in Ethiopia. The new directive now requires the oil companies to open and maintain foreign currency accounts in Ethiopia.  

The companies had the right to open and freely maintain foreign bank accounts outside of Ethiopia. However, the new directive stipulates that the companies should open and maintain a foreign currency account in Ethiopia.

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All the international oil companies engaged in oil and gas exploration and development projects have furiously protested NBE’s directive. The companies have lodged their complaints to the Ministry of Mines and Petroleum. “Even after a series of communications with the Ministry and the NBE the problem could not be resolved,” representatives of the oil firms told The Reporter.

NBE allowed a Trust Fund account to be opened in the corresponding banks for the oil and gas companies. Senior company executives said that the oil firms are obliged to open a Trust Fund Account in corresponding banks like Citibank or Deutsche Bank. “So that NBE and CBE will have access to the expenses. The main problem comes during discovery where NBE’s directive obliges oil and gas operators to open retention account at NBE. This means companies have to deposit their dollars at the NBE during production. The NBE tracks the transaction. The problem is that NBE has got no previous experience of managing Trust Fund Accounts or retention accounts. That is also a major concern,” the executives said. “Retention account is something that has never been applied to oil and gas companies across the world,” they added.

Representatives of the oil companies told The Reporter that the management of their companies have rejected NBE’s demand. “We understand that the country is facing foreign currency crunch. But we are bringing foreign currency from our offshore bank accounts to run our petroleum projects in Ethiopia. But ordering oil companies to open and maintain foreign currency account in Ethiopia does not solve the country’s forex problem,” the companies said. “Why should we bring and take back foreign currency from Ethiopia,” the company executives said.

 The executives said the new directive has become a stumbling block for petroleum investments. “We are unable to mobilise funds to Ethiopia due to the new directive. Those who intend to invest in oil and gas projects in Ethiopia decided to wait and see the developments,” they said.

 The companies called up on the government to review the controversial directive. “This would deter the Foreign Direct Investment flux,” they added.  

State Minister of the Ministry of Mines and Petroleum Guang Tutlam (MD) declined to comment on the matter. The Reporter’s attempt to get NBE’s response was not successful.

Poly GCL Petroleum Investments, Africa Oil, New Age, Delenox Energy, Gazprom are the international companies engaged in oil and gas exploration and development projects in Ethiopia. The Reporter has learnt that the oil firms are trying to present their complaints to Prime Minister Abiy Ahmed (PhD).

In a recent press conference Samuel Hurkato (PhD), the Minister of Mines and Petroleum, said that the companies want to have an offshore account while NBE wants them to open a foreign currency account here. “The NBE is proposing a new alternative which will be beneficial to the firms and that would not harm our national interest,” Samuel said. However, the Minister did not elaborate on the new proposal.

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