Energy expert, Dr Yussif Sulemana, has expressed the need for government to find sustainable ways of minimizing its dependence on the dollar.
According to him, the move by the Bank of Ghana to provide forex support of $120 million to BDCs in third quarter is a commendable move. He revealed that it is equally good news to petroleum consumers in the country. However, he noted that it is prudent to find alternative means of addressing forex usage in the country.
Dr Sulemana stated that the pump prices of fuel has to do with the exchange rate which largely affects the turn of events. In light of this, he underscored that even if the exchange rate was not the problem, by now, fuel prices would have been going down.
“Going forward, what I was expecting was that, we should rather look at sustainable ways of minimizing our dependence on the dollar. This chunk of green back, about $250- 400 million we churn out to import finish product, if we could strategize to source this product locally, that pressure will not be on Bank of Ghana and neither will we have pressure at the pump, and there will be a huge relief on the cedi as well.
“Whiles I support continuous injection to support the BDCs, let’s look at sustainable ways where we can try to bring back our refineries, and the new refineries, if we can champion them to bring them back to life. So that if even not all, we will be able to source some of these finished products locally…”Dr Yussif Sulemana
Dr Sulemana noted that the skepticism displayed by the IMF following the move by BoG must be overlooked. He explained that if Ghana decided to “live by the dictates, that is the word letter of IMF prescriptions, then we will draw the economy to a halt”, as there has to be trade-offs.
“I think the reason that Bank of Ghana gives for staying on course with continuous supply of green bucks to the BDCs is in the right direction. If I assume the Bank of Ghana were to stay the course and agree on what IMF is prescribing, and pull off the support all of a sudden, we will not able to arrest our pump prices.”Dr Yussif Sulemana
Stability of international market price of crude
Furthermore, Dr Sulemana expressed that on the international front, there’s a bit of a downward trend or a stable oil prices being experienced. By virtue of this, he indicated that the exchange rate has been the deciding fact.
“So, I still think the Bank of Ghana, even if they have to stop, they have to do that on systematic and gradual basis while they monitor the market, and that is exactly what I think they are doing. Leaving the market and BDCs on their own fate to source for dollar will just escalate the pump prices.”Dr Yussif Sulemana
Commenting on how significant pricing of fuel product is going to be affected, the energy expert revealed that at most, the prices are going to be stabilized and stability of prices is also good for business continuity. With this, he elaborated that the significance will be on the fact that it could keep the fuel prices stable.
“The fuel prices will come down if our currency appreciates against the green back, and that is a huge task to do and mountainous. But it’s not unsurmountable. I always think that we can do that especially if we try to find alternative route to relieve this perennial pressure that is being brought to bear on the local currency. So, at best I think it will bring stability to the pump prices, but reducing the pump prices will mean that our currency has to appreciate against the US dollar.”Dr Yussif Sulemana
Touching on how long international market prices will remain stable, Dr Sulemana highlighted that aside exchange rate contributing to what the consumer pays at the pumps, another huge factor is the prevailing global price of this commodity.
He stated that with the prevailing prices, it is difficult to determine for how long but for the last one month, it’s been below $80 and he projects that it could be below $80 for some time.
“The reason being that, the factor that is being brought to bear to keep this oil prices in this trajectory is potent because the west, they are not abandoning the course on this quantitative tightening. They still keep increasing the exchange rate and once this exchange rate is increased, these currencies are strengtheners, especially dollar. When there’s strengthening of the dollar, the cascading impact, there’s always a downward pressure on the oil prices and they plan to stay on course with that.”Dr Yussif Sulemana