The “Sudan Factor”: Support on Paper, Queues at Fuel Stations

Muhannad Awad Mahmoud
In a feasibility study, an investor calculates operating and storage costs, profit margins, capital turnover and return on investment. In Sudan, however, one additional item must be included, one that is unknown to economics textbooks and never taught at universities: the Sudan Factor.
This factor intervenes suddenly, making some people rich and others poor, without any managerial brilliance or catastrophic mistakes. All it takes is a decision that changes the rules of the market. At that point, the feasibility study no longer asks: how much will the factory produce? Instead, it asks: when will the decision be issued? When will the foreign currency arrive? And will the vessel reach port before fuel becomes breaking news and a long queue?
In the fuel sector, the Central Bank of Sudan intervened to provide foreign currency to fuel importers. The stated objective was a commendable one: to make UAE dirhams available at a lower exchange rate, with a difference of approximately 400 Sudanese pounds, so that the reduction would be reflected in the pricing adopted by the Ministry of Oil and ultimately benefit consumers. But the Sudan Factor added one small condition to the plan: the foreign currency had to arrive on time. This, apparently, is a technical detail that feasibility studies tend to overlook.
The foreign currency is delayed, so settlement is delayed; vessels are held up, and pricing is postponed. The subsidy reaches the paperwork, while the fuel remains at sea. According to reliable information available at the time of writing, five vessels carrying thousands of tonnes of fuel are waiting outside the ports. Naturally, a citizen cannot fill up their car with a statement issued by the Central Bank.
When supplies become scarce, consumers turn to the black market and pay several times the amount they were supposed to save through the 400-pound subsidy. Farmers pay more to harvest their crops, traders pay more to transport goods, and consumers then pay more to buy tomatoes. In this way, the Sudan Factor may create an additional profit margin for fuel traders that never appeared in the Excel spreadsheet. At the same time, the subsidy’s benefit disappears from the consumer’s accounts.
This is subsidy policy, Sudanese-style: support is announced for the benefit of citizens, who are then forced to pay out of pocket for its absence.
The irony is that, earlier, the Sudan Factor worked in the opposite direction, flooding the market with fuel when commercial banks provided foreign currency and used it to settle fuel shipments. In an incident reported in the press, a group of traders agreed not to sell below a price they had collectively set, and then swore on the Holy Qur’an to abide by that agreement. This was hardly a victory for competition; it was an arrangement designed to protect prices.
Yet the spectacle remains ironic: in times of abundance, traders fear that one of them might undercut the price; in times of scarcity, queues and the black market take over the task of keeping prices up. The Sudan Factor is present in both situations: at one time it floods the market, and at another it leaves it thirsty.
As for the dollar, it stood at around 7,000 Sudanese pounds during the period on which this discussion is based, before approaching 10,000 – an increase of up to 43 per cent. This does not mean that the Central Bank’s intervention in the fuel market was the sole cause of the pound’s depreciation. The war, the shortage of foreign currency resources and demand for imports are other contributing factors. Nevertheless, when a substantial and recurring demand for foreign currency is concentrated in the hands of a single institution, and that institution then delays supplying it, it does not ease pressure on the foreign exchange market as it should. On the contrary, it may accelerate that pressure. The Bank did not start the fire on its own, but it cannot reasonably behave as though it never went near the matchbox.
Gold offers another perspective on the story. Sudan needs gold export proceeds to generate foreign currency. However, if the official purchase price is lower than what producers or traders can obtain through smuggling, the official channel loses the competition before it even begins. A smuggler does not need a complicated feasibility study; comparing two prices is enough. If the purchasing policy makes smuggling more attractive, it pushes gold out of official channels, depriving banks of a foreign-currency source they urgently need to finance imports.
The problem is not that the Central Bank intervenes; such intervention may well be necessary. The problem arises when it becomes a single gateway that lacks sufficient foreign currency to clear shipments on time, or when it sets a price that cannot compete with the market, thereby encouraging gold to take another route. In such circumstances, the policy is generous in intention, delayed in implementation and costly for the very citizens it was supposed to help.
In a Sudanese feasibility study, therefore, do not simply write: “Subsidised dirham exchange rate: 400 pounds less.” Add the following underneath: “Foreign currency arrival time: unknown. Risk of shortages: present. Black-market costs: determined by the Sudan Factor.”
Then, in the final box, insert a photograph of a citizen standing in a queue, while someone explains that the subsidy has indeed arrived – it has simply reached the wrong place.

Shortlink: https://sudanhorizon.com/?p=19978