The National Petroleum Authority (NPA) will regulate the prices of petroleum products imported under the Gold-for-Oil (G4O) program in the interim until volumes significantly increase.
Furthermore, the NPA will collaborate with Bulk Oil Storage and Transportation (BOST) Company Limited to negotiate prices with international oil traders in order to ensure that the landed cost of products procured through the program is always competitive.
According to an NPA statement, the NPA would approve the price at which BOST would sell the products to bulk import, distribution, and export companies (BIDECs), as well as “the price at which the BIDECs will sell the products to oil marketing companies (OMCs) will also be approved by the NPA”.
“The applicable exchange rate for pricing the products supplied under G4O will be based on the average rate at which the gold was purchased from licensed gold exporters by the BoG.
“The Precious Minerals Marketing Company normally purchases the gold aggregated by the BoG.” (PMMC).
“The NPA will put measures in place to ensure that OMCs that lift products supplied under the G4O program pass the price on to consumers accordingly.
In this regard, BIDECs and OMCs that lift and supply G4O products will sell at the NPA-determined ex-refinery and ex-pump prices.
If products from G4O and other sources must be mixed, the ex-refinery and ex-pump prices will be computed using a weighted average.
“All BIDECs and OMCs that wish to purchase products under the G4O program will be required to sign an undertaking confirming their willingness to comply with the terms and conditions for participating in the purchase and sale of G4O products,” according to the statement.
The first consignment of approximately 40,000 metric tonnes of diesel, valued at approximately $40 million, arrived on January 15, 2023, kicking off the government’s G4O program.
The primary goal of the program is to use additional foreign exchange resources from the BoG’s domestic gold purchase (DGP) program to provide foreign currency for the country’s importation of petroleum products, which currently amounts to approximately US$350 million per month.
The initiative calls for payment for oil supply to be made in two ways: through barter trade, in which gold is exchanged for oil, or through a broker channel, in which gold is converted into cash and paid to the supplier.
According to the statement, the first consignment of 40,000 metric tonnes of diesel represented about 10% of the country’s combined monthly demand for petrol and diesel, and the plan was to gradually increase imports under G4O to represent about 50% of the total demand for petrol and diesel by March 2023.
“The program will ensure that the cost of importing the products from international oil traders will be comparatively cheaper,” it said, adding that “the consequent reduction in foreign exchange pressures and premiums charged by international oil traders, as well as efficiency gains from the value chain, will lead to lower ex-pump prices in the country”.