LONDON, Oct 9 (Reuters) - Morocco has become the first oil-importing country to turn to Wall Street banks to protect itself against high oil prices, the Financial Times reported on Wednesday.
The move highlights the challenges faced by governments in Africa and the Middle East grappling with social discontent because of rising fuel costs.
Morocco has entered into derivatives contracts to hedge any unexpected rise in the cost of imported fuel, the FT said, citing two people familiar with the deal.
The rare hedge transactions, made last month, come as Morocco starts to wind down a costly subsidies programme under pressure from the International Monetary Fund.
Morocco is the only oil importing nation known to be hedging its consumption through derivatives arranged by the government, the FT said.
Ghana, an oil exporter, has previously taken out hedges on oil imports and exports at the same time.
The Moroccan government initially hedged its imports with local bank Banque Marocaine du Commerce Exterieur (BMCE), and BMCE then paid premiums to Barclays, Citi and Morgan Stanley to take on the risk.
The transactions covered a large chunk of Morocco’s expected fuel consumption for the rest of the year, and cost the government roughly $50-60 million, the FT said, citing a person familiar with the deal.
The government bought so-called call options for European diesel, which give Morocco the right to buy fuel at a predetermined price for the rest of the year.
Morocco has yet to enter into hedges for 2014.
Morocco’s move comes as countries across the world balance the cost of fuel subsidy regimes with the threat of social unrest if they unwind them.
Morocco raised the prices of gasoline, diesel and fuel oil in mid-September, triggering street protests and calls from opposition parties for the government to resign.