June 20th, 2022 at 07:01 am
FUEL PRICE INCREMENT IN GHANA: EXCHANGE RATE AND GLOBAL MARKET IMPACTS CURRENT FUEL PRICES
Prices of petrol and diesel have risen to a large extent as was projected by the Institute for Energy Security. As of 13th June 2022, the price of fuel stood at GH 10.23 per liter which corresponds to 1.3 U.S dollars. A review of petroleum consumption further suggests that there had been a 48.3% increase in the price of gasoline in Ghana since January 2022.
This rise is claimed to be a result of the Russian-Ukraine war and the depreciation of the cedi. In this article, we shall discuss how the cedi depreciation is affecting the increment in fuel prices in Ghana, as well as public reaction to the issue.
CEDI DEPRECIATION CAUSING AN INCREASE IN FUEL PRICES
A report from the Bank of Ghana shows that the Ghana cedi has depreciated by about 14.6% against the US Dollar. This fall of the cedi has thus called for an increase in the policy rate to help attack cedi-denominated assets. Other reports also suggest that the cause of this depreciation of the currency is because Ghana’s sovereign bond is no longer profitable and there are also not enough reserves to shoot up the cedi.
PUBLIC REACTION TO THE CEDI DEPRECIATION AND INCREASE IN FUEL PRICES
This issue of increment in fuel prices has received several concerns from the public as well as other stakeholders.
Senyo Hosi for instance, the CEO Of the Ghana Chamber of Bulk Oil Distributors spoke during an interview on the Citi Breakfast Show. He said, “ The cedi depreciation has been quite burdensome on the petroleum importers. For instance, at the beginning of this window that started on 1st March, it was estimated that in the next two months, the exchange rate will be about Gh7.8. This is because when we sell, we do so on credit”.
Furthermore, Senyo Hosi stated that it takes them about 45 days just for the collection of cash. Again, they will have to spend another 15 days to convert and pay their suppliers in dollars, with the assumption that the price will still be GH 7.8. As of now, the exchange rate has increased to GH 8. And since there is no dedicated Foreign market, the speculation usually gets out of gear and they will have to speculate higher.
Also, some stakeholders have raised concerns on this issue. The CEO of Oil Marketing Companies, Kwaku Agyeman Duah also expressed his view during the same interview. He said, “ Obviously when we get to this stage what the state can do is to subsidize. Because we don’t and a working public transportation system, it affects us. If there was something like that, the government could have managed it. Now all we can do is subsidize”
IN CONCLUSION
From this, we can concur that the Ghana cedi is really depreciation against trading currencies like the US Dollar. As a result, the Ghanaian currency has lost quite a percentage of its value. This is thus causing this rise in the cost of fuel and other products in the country. Though various stakeholders have suggested ways to salvage this situation, the government is yet to pronounce its actions taken to tackle the situation.
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