Twelve major commercial banks have decided not to issue letters of credit to bulk oil distribution companies (BDCs) as a result of the huge debts the BDCs owe the financial institutions.
A similar incident occurred in July 2014 when seven out of ten key banks withdrew the financing of petroleum product purchases, which led to an acute shortage of fuel.
They however, resumed the issuance of the letters of credit after government made payment of $150m directly to the banks as part payment of its debt to the BDCs.
Chief Executive Officer of the Chamber of Bulk Oil Distributors, Senyo Hosi, has described the situation as “frustrating”, adding that it is becoming increasingly difficult for members to raise letters of credit to import petroleum products to serve the market.
The source indicated that the current situation has become precarious and could possibly affect the banking sector.
Credit: GBC
