Ghana’s 65th Independence Day celebration unconventionally fell on Sunday commemorating sixty-five years of sovereignty from European colonialism. The last time this august occasion had been celebrated on a Sunday was in 2005 when I was seven years and a class two pupil, who had never come across the term ‘exchange rate depreciation’ and ‘inflation rate.’
Two years later in July 2007, leading upstream oil exploration companies, Tullow Oil and Kosmos Energy, jointly discovered oil in commercial quantities at the offshore Jubilee Field in the Western Region. This was inherently envisaged to be the turning point in the nation’s lifelong history taking into cognizance the fact that the nation was gradually recovering from the reel’s coup d’etat had left on her for fifteen years.
Fast-forward to 2022, the Black Star country is grappling to realize that economy which its founder, Osagyefo Dr. Kwame Nkrumah had envisioned some years ago – becoming the shining star of Africa. 2019, 2020 and 2021 – the years preceding this year – have had a fair part to play in the current economic state of the country amidst the outbreak and aftermath of a pandemic, which decelerated global economy. West African sister nation and a leading trader, Nigeria had shut their borders to neighbouring countries and as a result slowing economic activities in the West Africa region – GDP growth for Ghana for 2020 was 0.4% as the world battled a stubborn COVID 19.
The International Monetary Fund (IMF) projected in its October 2021 World Economic Report that Ghana will grow at a rate of 6.2% this year on the backdrop of easing COVID restrictions coupled with improved micro and macro-economic activities. Despite this positive assessment from the international financial institution, the year 2022 arrived all gloom and doom starting with a downgrade of the country’s economic outlook by world rating agencies Fitch and Moody’s rendering the nation’s bonds unsecured.
The situation got even worse with the Institute of Energy Security (IES) disclosing that the price of fuel at the various Oil Marketing Companies (OMC’s) will go up by GHC 0.25 by February following a reinstatement of the Price Stabilization and Recovery Levy (PSRL), which was suspended in late November on account of a tempestuous strike action by the Ghana Private Road Transport Unions (GPRTU’s) and ride-hailing drivers countrywide, which left commuters stranded with many failing to attend to their workplaces. It was no news when prices at the pumps surpassed the GHC 8 mark with the minority calling for the scrapping of some three taxes; Energy Sector Levy, Sanitation and Pollution Levy and Special Petroleum Levy.
The Chamber of Petroleum Consumers (COPEC) is predicting diesel and petrol prices to cross GHC 10 and GHC 9 respectively, up from the GHC 6 at the beginning of the year which translates into 66.67 % increase in the all-important commodity at various Oil Marketing Companies (OMC’s) starting from the second pricing window this 16th March.
Crude oil has been a fundamental commodity to the economic stability of the Ghanaian economy and this has glaringly been manifested this year – with only three months into the year. Radical rise in fuel prices have had the dreaded trickle-down effect on the national economy. Inflation rate, a major economic indicator, has not been spared the blush either reaching a record high of 15.7% in February since its rebasing in 2019.
Traders have faced the brute of the raging oil prices with increasing cost of doing business with neighbouring Francophone countries with the cedi losing substantial grounds to the CFA Franc in February in the forex exchange. They were left with no choice than to transfer this high cost of business into the selling prices of their goods.
Goods on the average Ghanaian market has soared with goods in the building and construction industry experiencing a significant increase – the price of a bag of cement which was beforehand sold for GHC 35 has skyrocketed to around GHC 55. Commercial drivers have also voiced their dismay, threatening to embark on one or two strike action as if the obnoxious one in November was not enough.
University Teacher’s Association of Ghana (UTAG), early this year embarked on a strike action spanning almost one month all to bring their longstanding grievances before the Government.
The early months of a positive 2022 have been bedevilled with rising prices translating into poor living standards. The ongoing conflict between Russia and Ukraine is alluded to be the major cause of the radical fuel price levels with international sanctions placed on Russia, a leading player in the Oil and Gas industry.
Agricultural products such as fertilizer and grains have also been short in supply with the two countries engaged in this impasse, Russia and Ukraine, failing to supply the world’s share of these commodities.
Simple economics tells us that anytime demand exceeds supply, prices move up and this is exactly what is unfolding. With little intent to industrialize our economy and its agricultural sector, we have to rely on tons of imports from abroad and thus worsening our balance of trade surplus.
The exchange rate for the past few months has not favoured the Ghanaian economy at all with the Cedi experiencing a staunch 14.2% depreciation since the beginning of the year. It was no surprise when the Association of Ghana Industries (AGI) vehemently criticized Government’s move to suspend the reversal of the benchmark values on certain imported goods.
The AGI with a vision to drive an industry-led economy averred the essence of making importation of foreign goods into the country complex. They stand to reason that; we can reduce the annual Cedi depreciation against the major currencies by eating what we produce. A paradigm shift to an agro-based industry will not only shore up the Cedi but also control inflationary rates in the country bringing it to its desired bandwidth of 8+-2.
With a rising inflation of 15.7% and a struggling Cedi, the Central Bank’s Monetary Policy Committee (MPC) is set to meet next week to determine a favourable Policy rate which is expected to hold the nation’s spiralling economy in check. The policy rate has been maintained at 14.5% for the last two meetings with an eye on the rising inflation levels.
Well, maybe Ghana may not be able to attain the IMF’s projected economic growth of 6.2% with a contractionary policy on the card of the policy makers for the subsequent meetings considering the rising inflationary levels and a grappling Cedi, I believe recourse to long-term agricultural industrialization could be the country’s truce towards real economic independence.