Cedi-based petroleum transactions require amendment of Petroleum Revenue Management Act – Energy analyst

Energy analyst Benjamin Nsiah has commented on President John Mahama's proposal to transition petroleum sector transactions from U.S. dollars to the Ghana cedi. Nsiah explained that the shift would necessitate amendments to the Petroleum Revenue Management Act (PRMA). While paying for locally produced crude oil in cedis could alleviate pressure on the foreign exchange market, the current legal framework stipulates that certain petroleum-related funds must be managed in dollars.

Speaking on JoyNews’ The Pulse, Nsiah stated that the proposed change would only be feasible if the law governing petroleum revenues is revised. "The possibility depends on amending the Petroleum Revenue Management Act. I think that through that amendment, we’ll be able to now begin to mobilise resources in cedi and then allocate these resources to the various funds in the Act," he said.

President Mahama had expressed concern over the ongoing usage of U.S. dollars for petroleum sector transactions, particularly the requirement for entities like the Tema Oil Refinery (TOR) to obtain foreign currency to pay for oil supplies. He highlighted that some funds under the Petroleum Holding Fund, such as the Stabilisation and Heritage Funds, are designed as dollar-rated or dollar deposit funds.

Nsiah noted that even if oil supplied to TOR is paid for in cedis, the government would still need foreign currency to fulfil the obligations of these dollar-based funds under the existing law. He argued that a thorough review of the legal framework would be required to fully implement a cedi-based transaction system throughout the petroleum value chain.

Nsiah suggested that revising the PRMA to require all funds within the Act to be cedi-based or cedi deposit funds could address the issue raised by the President. He emphasized that such a reform would necessitate careful consideration to ensure it bolsters the stability of the petroleum sector while alleviating undue strain on Ghana's foreign exchange market.