Ghana: NPP Warns Fuel Price Relief Could Trigger New Energy Debt Crisis

Ghana’s main opposition New Patriotic Party (NPP) has warned that the government’s suspension of statutory margins supporting key institutions in the petroleum downstream sector could create another debt crisis if the policy continues.

The NPP said it supported measures to cushion consumers from higher fuel prices caused by the conflict in the Gulf region, but opposed funding such relief by withholding revenue from institutions in the downstream sector while keeping government taxes and levies on petroleum products unchanged.

“What we do not endorse is accumulating significant debt in the downstream energy sector by depriving it of the revenue it needs to function while keeping every Government tax and levy on petroleum products in place and passing this off as relief when the opposite is in fact the case,” the party said in a statement issued on Friday.

The NPP’s Policy Committee on Energy said the government’s GH¢2-per-litre intervention on diesel, introduced a few months ago, had been financed through the suspension of statutory margins allocated to key downstream institutions.

The party estimated that the measure was costing the sector more than GH¢500 million ($45.2 million) a month, rising to nearly GH¢683 million when the implied support to the Unified Petroleum Price Fund (UPPF) was included.

The NPP said GH¢2.076 billion had already been withheld from the Bulk Oil Storage and Transportation Company (BOST), distributors, fuel markers and the UPPF in April, May, August and September.

“None of it has been replaced. It is being converted, quietly, into deferred maintenance, supplier arrears and institutional borrowing,” said the statement, signed by Kojo Oppong Nkrumah, chairman of the NPP Policy Co-ordination Committee.

The party said the resulting obligations could eventually become public debt.

“Government is accumulating debt to BOST and other key players under the guise of ‘intervention’,” it said.

The NPP also warned that a further rise in international crude oil prices could make the intervention increasingly expensive, potentially pushing diesel prices above GH¢18 per litre even with the GH¢2 relief in place.

It said pricing data for Sept. 16-30 showed crude oil rising from $92.11 to $98.18 a barrel, an increase of 6.59%, while international petrol prices rose 14.57%, diesel prices increased 4.85% and liquefied petroleum gas (LPG) rose 13.47%.

The party also said the cedi weakened to GH¢11.50 per dollar from GH¢11.40.

“Diesel already sells in the GH¢17-plus range at the major OMCs,” the NPP said, referring to oil marketing companies. “Applying the next-window movements—international diesel up 4.85% and cedi down 0.88%—to current ex-pump prices, a diesel price north of GH¢18 per litre is entirely plausible even with the GH¢2 intervention in place.”

The party said Ghana had no control over when the conflict in the Middle East would end and questioned how long the government could sustain the intervention.

“If crude moves well above US$100 a barrel, does the subsidy become GH¢3, or GH¢4? Where does it end?” it asked.

The NPP urged the government to restore the suspended statutory margins and suspend taxes and levies on fuel for the duration of the crisis.

“Restore the statutory margins it has raided, stop digging a GH¢600 million monthly hole in the petroleum downstream that Ghanaians will otherwise repay as a new round of energy sector debt, and suspend the taxes and levies it collects on every litre of fuel for the duration of this crisis,” the party said.