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The government has made savings of GH₵1.4 billion (GH₵1,491‬ million), the equivalent of $284 million on debts owed Bulk Oil Distribution Companies (BDCs) since it assumed office in 2017.

It means that government will no longer pay this money to BDCs.

Through negotiations, government succeeded in reducing the Real Value Factor (RVF) and Forex Loss Under Recoveries Interest (FLURI) claims of BDCs by GH₵1.4 billion.

Upon assumption of office, Vice-President Dr. Mahamudu Bawumia mooted the idea of fresh negotiations with the BDCs to reduce the huge debt to save the state money.

These were contained in the 2018 Industry Report of the Chamber of Bulk Oil Distributors (CBOD).

GH₵458m savings on FLURI  

According to the report, the government succeeded in getting the BDCs to reduce the interest savings on FLURI by GH₵458 million, the equivalent of $87 million.

GH₵803 savings made on RVF

Similarly, negotiations also led to reduction in interest rate on RVF by GH₵803 million, the equivalent of $153 million.

GH₵230m saved from freeze on RVF and FLURI interest

A decision to freeze charging of interest on RVF and FLURI from a cut-off date amount to GH₵230 million savings, the equivalent of $44 million.

Negotiations revised the interest rate for computing claims

The report explained that the negotiations revised the interest rate for computing the claims from 12 to 5.25% for the US Dollar indexed FLURI.

It also reduced the National Petroleum Authority (NPA) approved 31.79% to 19% for the Ghana Cedi indexed RVF.
It noted that March 31, 2018 was agreed as the cut-off date for Government’s accrued liability.

$432m slashed through negotiations since 2013

This brings the total savings granted by BDCs to the government to GH₵2.27 billion, the equivalent of $432 million since the commencement of negotiations over the BDC sector debts in 2013.

Ernst & Young (E&Y) audit

The report explained that the Ministry of Finance commissioned Ernst & Young (E&Y) within the third quarter of 2018 to validate the FLURI and RVF claims based on the negotiated parameters.

GH₵905.8m validated

The validation exercise which was completed in May 2019 revised the claims to $174 million ($174,083,129), the equivalent of GH₵905.8 million (GH₵905,876,377).

GH₵498.93m over recoveries

The National Petroleum Authority (NPA) however accrued GH₵498.93million ($129.90m) in over recoveries charged on the sale of Aviation Turbine Kerosene (ATK) and gasoil mines for the period July 2015 to February 2017.

The pricing of these products was not deregulated as part of the price deregulation policy implemented in 2015. They are nonetheless not subsidised.

The over-recovery income generated from these products was partly used to pay subsidies accrued.

GH₵488.26m incurred between July 2015 and December 2018

This brings the total subsidies incurred by government on these products post deregulation, July 2015 to December 2018, to GH₵488.26million ($113.11m).

Over recovery charges removed since March 2017

Effective March 2017 to date, the NPA removed all over recovery charges on their sale and hence ceased generating over-recovery income on these products.

Government has cleared $300 million of outstanding legacy debt to Bulk Oil Distribution Companies (BDCs) between 2017 and June 2019.

$49.77m outstanding debt to be cleared end of year

A total of $49.77 million outstanding debt is expected to be paid by end of 2019.

This brings to total an amount of $930 million in subsidies incurred by government through its subsidy policy between 2012 and now.

The BDC legacy debts comprises 2011-2015 Forex Loss Under Recoveries (FLUR), 2011-March 2018 Real Value Factor (RVF) and Forex Loss Under Recovery Interest (FLURI)