The National Bank of Ethiopia (NBE) has launched a comprehensive investigation into claims that numerous coffee exporters misappropriated specialized lending advantages, which were designed to boost their international trading endeavors. This scrutiny was initiated after the Ethiopian Coffee and Tea Authority alerted the NBE about potential financial discrepancies, prompting a broader audit of financial engagements with 58 specific coffee exporting entities. The probe’s findings could have significant implications for the country’s vital coffee export sector.
Detailed Loan Review Assessment
Following suspicions of irregularities reported by the Ethiopian Coffee and Tea Authority, the NBE issued a directive to domestic banks to audit loans granted to 58 specified coffee exporters. This probe into the coffee trade sector has raised concerns about the use and impact of these loans on the nation’s coffee exports.
Frezer Ayalew, the Director of Bank Supervision at NBE, remarked that the audit results have been received and are currently under further examination. All local banks were mandated to provide detailed assessments, which encompassed data on granted loan amounts, collateral details, loan utilization purposes, foreign currency allocations, and the status of the loans as of July 2023. The deadline set for these audits was September 4, 2023, and Ayalew confirmed timely compliance.
Coffee Exporters’ Loan Privileges
The Coffee and Tea Authority, prior to this measure, had noted that 144 coffee exporters were granted special lending privileges in the last fiscal year to alleviate financial challenges and bolster foreign currency earnings. Notably, out of these, 58 did not proceed with coffee exports post securing loans, 37 made appropriate use of the funds for exporting purposes, while the whereabouts of 49 exporters remain uncertain.
The Authority has now suspended the certifications for the 58 exporters in question and has advised similar actions by other regulatory bodies. In a letter penned by Deputy Director Shafi Oumer, it was pointed out that the failure to use these loans for their intended purpose has deprived the nation of expected foreign currency inflow.
The Wider Context
Ethiopia’s coffee export sector faced considerable challenges in the past fiscal year. Revenue generated stood at approximately USD 1.33 billion from 240,000 tonnes of coffee exports. This figure falls considerably short of the projected USD two billion and is less than the previous year’s revenue of USD 1.4 billion. This decline is further underscored by reports of multiple coffee exporters defaulting on contracts and failing to meet export commitments.