Ghana’s Oil Marketing Companies (OMCs) yesterday reduced the prices of petroleum products by up to 15 percent following the marginal appreciation of the Ghanaian Cedi, which made a 26 percent gain over the dollar in the last two weeks, and a 10 percent reduction in the price of imported refined petroleum products. The lowering of pump prices come during the third deregulated pricing regime for the period of July 16 to July 31.
The Ghanaian government cut off its subsidy of petroleum products on June 16, allowing oil marketers to sell at their independent prices albeit within a window that that it agrees with them. The deregulation triggered a rise in the price of petroleum products across the country, starting with a four percent increase on June 16 and a further 15 percent leap on the 2nd of July. However, yesterday reduction in pricing brought relative relief for the Ghanaians even as it remains higher than pre-subsidy removal times. According to the Ghana News Agency, OMCs have reduced the price for petrol from GHȼ 3.97 per litre to GHȼ 3.53 per litre and GHȼ 3.73 to GHȼ 3.14 per litre for diesel, all in the bracket of GHȼ 0.10 and GHȼ 0.20 per litre. It added that Ghana Oil Company Limited (GOIL), the only indigenous downstream oil marketing company in the country, still maintained marginal subsidy on petroleum products; selling GHȼ 3.46 per litre for petrol from a previous GHȼ 3.79, and GHȼ 3.07 per litre for diesel from GHȼ 3.73.
Leading voices in development economics have long called for African governments to cut subsidy of petroleum products in order to free up funds for capital projects. Among them is the International Monetary Fund whose MD Christine Lagarde said in January that, subsidizing countries “should think about reducing and phasing out the oil subsidies, taking advantage of the oil price and using public finance more wisely than in undifferentiated energy subsidies.” Ghana, which recently took a $1 billion bailout from the lender, has heed that call, but Countries like Nigeria, which spent around $6.5 billion on subsidy in the past two years, is yet to sign up on the measure.
Nigeria’s President Muhammadu Buhari said last Monday that he was yet to be convinced on the need to immediately deregulate the country’s downstream oil sector. “When you touch the price of petroleum products, that has the effect of triggering price rises on transportation, food and rents,” he said, arguing that what is needed is a return to “the good old days of transparency and accountability.” The Ghanaian government says it is gradually transitioning to the new days of market determined prices. “The implementation of this first stage of price deregulation will continue into subsequent pricing windows while the Authority reviews the existing legal framework of petroleum products, pricing towards a smooth implementation of the full steps of petroleum products price deregulation in Ghana,” the CEO of the National Petroleum Authority (NPA), Mr Moses Asaga said in June.
Part of the deregulation process includes the NPA’s monitoring of the prices set by OMCs which they are compelled to display at their retail outlets. The NPA says this is to ensure that “all petroleum service providers apply the [Prescribed Petroleum Pricing] formula in the right way.” According to the formula, the oil marketers submit their indicative expump prices to the NPA two days before every pricing window. The submitted prices represent the maximum it can charge for a two week period within which the companies cannot raise–although they can reduce–their price above its submitted figure. The NPA says the price quoted by a particular marketer must remain the same across all its its retail outlets.
The current drop in the prices of petroleum products is yet remove the mixed reactions to the deregulation as prices are still higher than pre-subsidy removal times. However, Kwaku Agyemang-Duah, the Chief Executive of the Oil Marketing Companies, said the prices could keep going down in further review periods especially if the Cedi maintained its strength against the dollar and other currencies and the global price of oil keeps falling. However he said Ghana was still far from daily pricing which the African Centre for Energy Policy had proposed. “We also have to adjust our pumps to let it reflect what we say the price is and that means we have to employ GSA to come and do some work for us and it comes at a cost. We are looking at how hard a daily price review it will be on Ghanaians especially when it is going up; and we think it’s a place that we have to go. But for now, we have to deal with the fortnight reviews then when Ghanaians get used to the liberalized regime, there might be the need to do that” he said in an interview with TV3.
