IMF: Ghana Removes Subsidy, Petrol Prices Jump; Nigeria Next?

Feb. 17, 2013

NewsRescue- The Ghanaian government has removed subsidies on gas resulting in a 20 percent hike in gas prices and 50% increase in cooking gas (LPG) costs.

The National Petroleum Authority (NPA) explained the hike as being necessary to reduce budget deficits.

Ghana’s economy rating had fallen in recent times due to increased high-interest borrowing with no commensurate national production. The Fitch rating reportedly has turned negative.

There was an immediate jump in prices in Ghana with cab cost increasing by about 2 cedes and costs of commodities also increasing.

It can be recalled that there were large scale demonstrations across Nigeria 2012 January due to similar removal of the so-called fuel subsidy following a visit by IMF boss, Christine Lagarde.

Nigeria’s proposed budget has been reported to not have any accommodation for subsidizing fuel and as such it is believed that a similar subsidy removal with accompanied jump in prices of petrol and all commodities will soon present a debacle in Nigeria.

Ghana spent over 1 billion dollars in oil subsidies in 2012 and would spent more than twice that in 2013 without removal of the subsidies.

In the meantime, United States with new methods of drilling, ‘fracking,’ is decreasing its oil dependence from nations like Nigeria and Saudi Arabia, which is predicted to have a serious economic effect on those Nations if other investments are not made. In another 5 years, the US is poised to export and no longer import fuel.

What this means is that Nigeria and Saudi Arabia, the big oil exporters to the US will become failed states, in the next few years if they continue oil dependence.

A spokesperson for Nigeria’s new youth political party, the SNP, Mr. Olatokunbo Babatunde, speaking from Ghana said, it is time for Nigeria to make dynamic changes in governance and policies to protect very serious calamity due to its heavy dependence on oil and as a result of neglected investments and growth on industry.