(JUBA) – South Sudan’s state-owned Nile Petroleum company has announced that the recent decision by the Central Bank of South Sudan has forced them to impose new higher prices of fuel, increasing the retail sale three times higher to 22 South Sudanese pounds (SSP) per litre.
“You are all kindly notified effectively today the, 17th December, 2015 Nilepet new fuel rates shall be as follows: 1. Whole Salve rate (one truck) is 20 SSP per litre; 2. Depot is 21 SSP per litre; 3. Retail rate is 22 SSP per litre,” Nilepet said in a circular sent out on Thursday, a copy of which obtained by Sudan Tribune.
The instructions to increase the fuel prices was sent out to all fuel station managers in the country by Chol D. T Abel, the director general of downstream Nilepet.
The new development comes only three days since South Sudan central bank announced free floating of the South Sudanese pounds against foreign currencies, prompting further devaluation of the South Sudanese pounds with 20 SSP to 1 US dollar in the banks.
South Sudanese top officials of the central bank and the ministry of finance and economic planning said they were forced to float the currency due to lack of US dollars in the reserve and the decrease in oil production because of the two-year old violent conflict in the country.
Before the 15 December 2013 war erupted the official rate of the exchange was 2.9 SSP per 1 dollar and the price of fuel was only 6 SSP per litre, which has now jumped to 20 per litre according to the new announcement.
“Please note this change has been sparked by the Central Bank of the Republic of South Sudan,” Nilepet official Chol further explained to the public in his order on Thursday.
Following announcement of realignment of local currency exchange rates, fuel stations and other shops remained closed in Juba and other major towns for the last three days, prompting the Nilepet management to act.
However, the decision of the central bank has been welcomed by several international economists and think-tanks organizations in Juba, particularly due to the fact that those who poses dollars, such as international organizations will buy dollars at ease with high rate.
“South Sudan’s decision to float its currency is much welcome, in light of deteriorating oil prices and the exhaustion of reserves,” said International Growth Centre (IGC), a London-based research group working in South Sudan in a statement on Thursday.
Keith Jefferis, an IGC Consultant and former deputy governor of the Central Bank in Botswana said “the exchange rate is arguably the most important price in an economy especially for an open economy country like South Sudan, and maintaining the fixed exchange rate was clearly unsustainable.”
Jefferis had authored an IGC report for the government of South Sudan in October.
The limited supply of United States dollars from the Central Bank has meant that only a few people could access dollars at the official rate of 3 SSP to the dollar, while the vast majority of the people were left to source dollars in the black market at a rate nearly six times the official rate.
The differential access to dollars at the official rate distorts the market, and created an opportunity for those with access to dollars at the official rate to engage in “round tripping,” IGC said in a statement extended to Sudan Tribune.
Richard Newfarmer, country director of the IGC’s programme in South Sudan, said that allowing the banks to buy and sell dollars at market rates will free more dollars, benefiting more those who posses dollars.
“People who have dollars will now be willing to exchange their dollars through the banks, thereby allowing the banks to meet the needs of their customers, including importers and individuals with dollar deposits,” said Newfarmer.
It is not clear if the government will also issue prices for other commodities in the market after releasing the price of the fuel.
The sudden fuel price increase seems to be the first bite among expected “shocks” in the market due to the floating of the exchange rate.