Twelve of Ghana's major commercial banks have said they will not issue letters of credit (L/Cs) to the country's bulk oil distribution companies (BDCs).

The banks cite the BDCs' huge debts as the reason why L/Cs are being refused, and fuel shortages are anticipated.

Government intervention

The move is reminiscent of similar circumstances in July 2014 when seven banks withdrew from financing petroleum product purchases, which led to acute fuel shortages.

Last year, L/C flows resumed once the government stepped in to provide US$150 million paid directly to the banks to partially offset their indebtedness to the BDCs.

Negative impacts

Chief Executive Officer of the Chamber of Bulk Oil Distributors, Senyo Hosi, has told local media that the difficulties raising L/Cs is frustrating for its members who find themselves unable to meet market demands.

A senior banking official speaking to Ghana Broadcasting Corporation said the situation also poses a severe threat to the banking system.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.