Central Bank Nods to Fuel Imports By Foreign Investors, Embassies, International Orgs

The National Bank of Ethiopia (NBE) has issued a significant amendment to its Franco Valuta Directive, permitting diplomatic missions, foreign investors, and international organizations to directly import fuel for their own consumption. This policy shift, effective May 29, 2026, allows these entities to utilize their own foreign exchange resources, bypassing the state-owned Ethiopian Petroleum Supply Enterprise (EPSE) and the need for letters of credit from local banks. The move is primarily aimed at alleviating severe pressure on Ethiopia's strained foreign exchange reserves, as fuel constitutes the country's largest import expense. While granting greater autonomy to select institutions, the directive maintains EPSE's central role in supplying the broader domestic market and includes strict provisions against the resale or diversion of imported fuel.

Ethiopia's economic landscape has long been characterized by stringent foreign exchange controls and a centralized approach to critical imports. In a notable departure from this long-standing policy, the National Bank of Ethiopia (NBE) recently introduced a pivotal amendment to its Franco Valuta Directive. This new directive empowers diplomatic missions, foreign investors, and international organizations to directly import fuel for their operational needs, utilizing their own foreign currency without recourse to the domestic banking system or the state-owned Ethiopian Petroleum Supply Enterprise (EPSE).

This development marks a significant shift in Ethiopia's fuel supply framework, which for over five decades has seen EPSE hold an exclusive monopoly over refined petroleum imports. The policy change, effective May 29, 2026, is a strategic response to the nation's acute foreign exchange shortages and the substantial financial burden posed by fuel imports, which account for approximately a quarter of Ethiopia's annual foreign currency expenditure. For legal practitioners advising clients operating within Ethiopia, understanding the nuances of this amended directive is crucial for navigating the evolving regulatory environment and leveraging the newfound operational flexibility.

This article delves into the background of Ethiopia's fuel import regime and foreign exchange policies, analyzes the key provisions and implications of the NBE's new directive, and concludes with practical considerations for legal professionals and their clients.

For decades, the Ethiopian Petroleum Supply Enterprise (EPSE), a state-owned entity, maintained an exclusive monopoly over the importation and distribution of refined petroleum products in Ethiopia. This centralized model, while allowing the government to control retail prices and manage strategic reserves, rendered the landlocked nation highly vulnerable to external shocks, including global price volatility and supply chain disruptions. Fuel consistently represents Ethiopia's largest import expense, costing an estimated $4.2 billion annually and consuming a significant portion of the nation's foreign currency reserves.

The "Franco Valuta" system, a mechanism allowing eligible entities to import goods by paying with foreign currency held abroad, has existed in Ethiopia, but its application lacked a clear legal framework, leading to issues such as customs misclassification and capital control violations. The NBE has been actively reforming its foreign exchange regime, including a shift towards a more market-based exchange rate and adjustments to foreign currency retention rules, as evidenced by Directive No. FXD/01/2024. These broader reforms aim to stabilize the macroeconomy and alleviate pressure on foreign currency reserves.

Furthermore, Ethiopia's Investment Proclamation No. 1180/2020 introduced an open approach to foreign investment, shifting from a positive-listing to a negative-listing approach for investment sectors, thereby expanding opportunities for foreign investors. However, investments in the prospecting, exploration, and development of minerals and petroleum are governed by separate legal regimes. The current directive specifically addresses the critical issue of fuel access for key foreign entities within this evolving regulatory landscape.

The National Bank of Ethiopia's amended Franco Valuta Directive, signed by Governor Eyob Tekalign and effective May 29, 2026, explicitly permits foreign direct investors, diplomatic missions, and international organizations to import refined petroleum products for their own consumption. A key feature of this directive is the ability of these eligible entities to procure fuel using their own foreign exchange resources, thereby bypassing the state-owned EPSE and eliminating the need for letters of credit from local banks. This mechanism is designed to reduce the demand on Ethiopia's scarce foreign exchange reserves, which have been severely strained by high import costs and global supply chain disruptions.

Crucially, the directive stipulates that fuel imported under this scheme is strictly for the importer's personal use and cannot be sold to the public, transferred to third parties, or mixed with the country's commercial fuel supply. The quantity and value of fuel imports will be determined based on approvals issued by the relevant recommending government authority, rather than a fixed dollar ceiling. To ensure compliance and prevent diversion to the black market, the Ethiopian Customs Commission is mandated to log and track every shipment through a digital monitoring system established by the central bank. Importers must present a valid diplomatic or investment license along with a supporting letter from a relevant government institution to clear fuel through customs.

This policy shift, while significant, does not signal a full liberalization of Ethiopia's domestic retail fuel market. EPSE will continue to oversee fuel imports and distribution for the broader domestic market, maintaining its central role in the national petroleum supply chain. The directive also expands the range of goods eligible for import under the Franco Valuta scheme to include other commodities and capital equipment for international organizations, NGOs, charitable institutions, manufacturers, and exporters, further aiming to facilitate essential imports without burdening national forex reserves.

It is important to note the interplay with other recent Ethiopian policies, such as the ban on importing fuel-powered vehicles for diplomatic missions, which came into effect in August 2024. While seemingly contradictory, the vehicle import ban is driven by climate change commitments and a push towards electric vehicles, whereas the fuel import directive addresses immediate operational needs for existing vehicles and machinery. The NBE's move provides a practical solution for entities that still rely on fuel-powered assets, ensuring their continued operation while the country transitions to green energy.

The National Bank of Ethiopia's amended Franco Valuta Directive represents a pragmatic and strategic intervention designed to alleviate the severe foreign exchange pressures facing the country, particularly concerning its largest import commodity: fuel. By empowering diplomatic missions, foreign investors, and international organizations to directly import fuel using their own foreign currency, the NBE has provided critical operational relief to these entities while simultaneously conserving national reserves. This targeted liberalization, though not a full market opening, signals a proactive approach to managing economic challenges and fostering a more conducive environment for international engagement and investment.

For legal practitioners, advising clients on this new directive requires a thorough understanding of its specific requirements, particularly the strict 'own consumption' rule and the procedural steps for obtaining necessary government approvals and customs clearance. Clients should be made aware of the digital tracking mechanisms and the severe penalties for any diversion of imported fuel. While this directive offers immediate benefits, practitioners should also monitor future regulatory developments, as Ethiopia continues its broader economic reforms and its transition towards a greener economy, which may further impact fuel and energy policies. This measure, alongside other recent forex reforms, underscores Ethiopia's ongoing efforts to enhance economic resilience and attract foreign capital.