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

The National Bank of Ethiopia (NBE) has introduced a significant policy shift through its new "Import on Franco Valuta Directive No. FVD/01/2026," effective May 29, 2026. This directive permits diplomatic missions, foreign investors, and international organizations to directly import fuel for their own consumption, bypassing the state-owned Ethiopian Petroleum Supply Enterprise (EPSE). The move aims to alleviate pressure on Ethiopia's strained foreign exchange reserves and streamline operations for these entities, who can now use their own foreign currency without requiring Letters of Credit from domestic banks. This marks a notable departure from the long-standing state monopoly on fuel imports, though strict conditions apply to prevent resale and ensure accountability.

Ethiopia's economic landscape is witnessing a pivotal change in its foreign exchange and import regulations, particularly concerning essential commodities like fuel. The National Bank of Ethiopia (NBE) recently enacted the "Import on Franco Valuta Directive No. FVD/01/2026," which came into force on May 29, 2026. This new directive fundamentally alters the mechanism for fuel procurement for specific categories of entities, allowing diplomatic missions, foreign investors, and international organizations to directly import fuel for their internal use.

This policy adjustment is a strategic response to persistent foreign exchange shortages and aims to reduce the burden on national reserves, which have historically been under immense pressure due to the high cost of fuel imports. By enabling these key stakeholders to utilize their own foreign currency, the NBE seeks to enhance operational efficiency for foreign entities and foster a more attractive investment climate, while maintaining a degree of control over the broader fuel market. The directive represents a significant step towards liberalizing certain aspects of the import regime, moving away from a centralized state-controlled system for these specific actors.

For decades, the importation and supply of refined petroleum products in Ethiopia have been largely monopolized by the state-owned Ethiopian Petroleum Supply Enterprise (EPSE). EPSE's mandate included supplying petroleum to distribution companies, forecasting demand, maintaining national reserves, and investing in depot facilities, effectively making it the sole importer and distributor for the country. This centralized model, while providing the government with strict control over retail prices, also rendered the nation vulnerable to external shocks and exacerbated challenges during periods of global supply chain disruptions and domestic hard currency shortages.

The concept of "Franco Valuta" imports, which allows goods to be brought into Ethiopia using foreign currency obtained from sources outside the domestic banking system, has existed but was previously subject to a fragmented and often unclear regulatory framework. This lack of comprehensive guidelines led to instances of misuse, misreporting, and illicit financial flows. In a broader context, the NBE has been undertaking significant foreign exchange reforms, including the "Green Directive" (Directive No. FXD/01/2024), which aimed to shift towards a more market-based exchange rate system and streamline currency-related activities. The new Franco Valuta Directive, FVD/01/2026, specifically repeals Article 8 (8.1.3) of the earlier FXD/01/2024, indicating a targeted refinement of the foreign exchange regime to address specific import challenges.

The "Import on Franco Valuta Directive No. FVD/01/2026" introduces a critical carve-out from EPSE's long-standing monopoly, specifically for diplomatic missions, foreign investors, and international organizations importing fuel for their *own consumption*. This means these entities can now procure fuel using their own foreign currency, bypassing the need for foreign exchange from the domestic banking system and eliminating the requirement for Letters of Credit (LCs) from local banks. This direct import mechanism is a strategic move to ease the severe pressure on Ethiopia's domestic foreign exchange reserves, as fuel constitutes a substantial portion of the nation's import expenses.

However, the directive is not without its limitations and safeguards. Crucially, fuel imported under this scheme is strictly for personal use and cannot be sold to the public, transferred to third parties, or integrated into the country's commercial fuel supply. The volume and value of such imports will be subject to approval by a recommending government office, ensuring a degree of oversight and preventing potential abuse. Furthermore, importers are required to possess a valid diplomatic or investment license and a supporting letter from a relevant government institution, with digital tracking by the Ethiopian Customs Commission implemented to monitor shipments and prevent black-market diversion or false declarations.

This policy aligns with the NBE's broader agenda of foreign exchange liberalization, as seen in the "Green Directive" (FXD/01/2024), which aimed to introduce a market-based exchange rate system and remove certain import restrictions. While the FVD/01/2026 specifically addresses fuel imports, it also expands the scope of Franco Valuta imports to include other commodities and capital goods for international organizations, NGOs, charities, manufacturers, and exporters. This indicates a concerted effort to facilitate trade and investment by reducing bureaucratic hurdles and leveraging external foreign currency sources, thereby mitigating the impact on Ethiopia's limited hard currency. Despite these changes, EPSE will retain its central role in importing and supplying fuel to the general domestic market, signifying a targeted rather than a wholesale liberalization of the petroleum sector.

The National Bank of Ethiopia's new Franco Valuta Directive represents a calculated and significant policy adjustment designed to address critical foreign exchange challenges and improve the operational environment for key international and foreign investment stakeholders. For practising attorneys advising diplomatic missions, foreign investors, and international organizations in Ethiopia, understanding the nuances of Directive No. FVD/01/2026 is paramount. Clients can now explore direct fuel import options, potentially leading to greater predictability and efficiency in their operations, free from the constraints of domestic foreign exchange availability and the state-controlled supply chain.

Practitioners must guide their clients on strict adherence to the directive's conditions, particularly regarding the prohibition of resale, the requirement for government approvals, and the digital tracking mechanisms. Failure to comply could lead to severe penalties, including monetary fines, goods confiscation, and criminal liability. While this directive offers a welcome relief for eligible entities, the broader Ethiopian foreign exchange landscape remains dynamic. Attorneys should continue to monitor further amendments to the NBE's foreign exchange directives and related investment laws, as the government continues its phased approach to economic reforms and market liberalization. The success of this initiative will likely influence future policy decisions regarding other essential imports and the overall ease of doing business in Ethiopia.