The Forex Illusion: Why Ghana’s Pumps and Kitchens Are Bleeding Despite a Stronger Cedi

The frustrating reality of high fuel and Liquefied Petroleum Gas (LPG) prices in Ghana, even as the Cedi strengthens against the US dollar, is caused by a structural trap: our reliance on imported refined petroleum, high international market premiums, fixed domestic levies, and a historical failure to process our own offshore crude and gas instead of flaring it. For the average Ghanaian, tracking the forex board has become a source of deep confusion. The Cedi recovers, yet transport fares hold firm, commercial drivers protest, and the cost of filling both a car tank and a household cooking gas cylinder remains painfully high.

To understand this disconnect, we must stop looking at the exchange rate in isolation. The foreign exchange market is only one leg of a three-legged stool. The other two legs—volatile international refined product costs and rigid domestic tax laws—frequently crush any benefits a stronger Cedi brings to our shores, hitting both our roads and our kitchens.

Inside the Pricing Paradox: The Three Forces Keeping Fuel and Cooking Gas High

When Oil Marketing Companies (OMCs) and LPG Marketing Companies (LPGMCs) calculate what you pay at the filling or cylinder-recirculation station, they are bound by structural factors that currency appreciation alone cannot fix:

• We Buy Fuel, Not Just Currency: Ghana predominantly imports finished, fully refined petroleum products (Euro 4 Petrol, Diesel, and LPG) rather than processing raw crude locally for immediate consumption. When global supply disruptions—such as shipping bottlenecks or geopolitical conflicts—drive international refined product premiums upward, the purchase cost rises sharply. This global price surge completely wipes out the purchasing power gained from a stronger Cedi.
• The Flat Tax Floor: A massive chunk of the ex-pump price is made up of statutory government levies. Built into every single litre of petrol and every kilogram of LPG are flat, non-percentage charges like the Energy Sector Levy, Road Fund Levy, and Sanitation and Pollution Levy. Because these taxes are fixed Cedi amounts rather than percentages, they do not shrink when the dollar falls. They act as an artificial floor, keeping prices high even if the raw fuel cost drops to near zero.
• The Bi-Weekly Pricing Lag: Under the National Petroleum Authority (NPA) deregulated framework, prices are adjusted on a two-week cycle based on historical averages. Importers buy their inventory weeks in advance. If the Cedi appreciates today, you will not see that reflected at the pump or the LPG station until the current pricing window closes and companies clear out their older, more expensive stock.

The Kitchen and Chop Bar Crisis: Affordability Over Clean Energy

The fuel crisis does not stop at the gas station; it moves directly into Ghanaian homes and local businesses through the soaring cost of LPG. A standard 14.5kg cooking gas cylinder has transitioned from a basic utility into an expensive luxury item.

• The Rollback to Biomass: High LPG prices have forced households and commercial food vendors—including our local eateries and "chop bars"—to abandon gas cylinders altogether. To stay financially afloat, these businesses are actively retrogressing to charcoal and firewood.
• Severe Public Health Risks: The return to solid biomass triggers a spike in indoor and outdoor air pollution. Women, children, and kitchen workers are subjected to heavy smoke inhalation, drastically increasing the long-term risk of severe respiratory illnesses, cardiovascular disease, and eye damage.
• Rapid Environmental Degradation: The mass economic migration back to charcoal and firewood accelerates deforestation across Ghana's fragile ecological zones. This commercial demand for timber undermines decades of national reforestation initiatives, accelerates soil erosion, and actively damages Ghana's regional climate goals.

The Ultimate Irony: Stop Flaring Gas for a Better Tomorrow

The most glaring contradiction in Ghana’s energy ecosystem is happening offshore. While chop bars cut down local forests for fuel, millions of cubic feet of associated natural gas are routinely re-injected or flared into the atmosphere at our offshore wells—such as the Jubilee, TEN, and Sankofa fields.

Historically, Ghana’s offshore operations have struggled with a lack of comprehensive gas-gathering infrastructure. Flaring or re-injecting this valuable resource because we lack the immediate capacity to capture and fractionate it into domestic LPG is an economic and environmental tragedy. We are literally burning away our energy independence in our oceans while importing expensive, finished LPG from Europe and the Middle East.

While the state-owned Tema Oil Refinery (TOR) and private operations like the Sentuo Oil Refinery try to scale up, they still lack the processing volumes required to absorb domestic raw gas and turn it into affordable household fuel. We export raw wealth and burn the byproduct, only to import expensive, finished inflation.

Actionable Policy Recommendations for Permanent Relief

To stop being hostages to global oil shocks and currency volatility, Ghana must aggressively pivot from market defense to structural energy independence:

• Enforce Zero-Flaring and Mandate Local Gas Fractionation: The Ministry of Energy and the Ghana National Petroleum Corporation (GNPC) must strictly enforce zero-flaring timelines on offshore operators. Instead of flaring or re-injecting associated gas, the state must expand investments into gas-gathering infrastructure to channel 100% of this resource to the Ghana Gas Atuabo Plant and local refineries for immediate conversion into cheap, commercial-grade LPG.
• Remove All Taxes and Levies from Household and Commercial LPG: If the state is committed to environmental sustainability, public health, and stopping deforestation, cooking gas should not be taxed like a luxury commodity. The government should completely strip away consumer taxes on LPG. Lowering the price of cooking gas makes it cheaper than charcoal, incentivizing households and chop bars to return to clean energy.
• Introduce an Automated, Sliding-Scale Fuel Tax Cushion: Fixed statutory levies on petrol and diesel should not remain rigid during international crises. The government should implement a dynamic tax structure. When global refined fuel costs spike beyond a set threshold, specific components like the Special Petroleum Tax or the Energy Sector Levy should automatically scale downward to insulate local transport operators.
• Double National Strategic Storage Capacity: The Bulk Energy Storage and Transportation (BEST) company must expand its tank farms to hold at least a three-month buffer of both finished vehicle fuel and LPG. Buying in bulk when global prices drop allows the state to inject cheaper inventory into the market during global supply crises, successfully flattening local pump and kitchen spikes.

We Cannot Subsidize a Structural Flaw

Ultimately, waiting for the Cedi to fix Ghana’s fuel and cooking gas crisis is an exercise in futility. A stronger local currency is a welcome macroeconomic shield, but it cannot rewrite the laws of global supply and demand, nor can it eliminate the heavy load of domestic fuel and gas levies. True, lasting relief will not come from trading desks at the Bank of Ghana. It will only come when we stop flaring our own natural gas offshore, confidently capture and refine our own resources, strip taxes from household cooking alternatives, and establish a flexible tax structure that prioritizes the pockets of Ghanaian consumers. Until we stop burning our gas in the ocean and exporting our raw crude, our households, chop bars, and pockets will continue to pay an unyielding international price for an abundance we pull right out of our own backyard.

✍️ Submitted by:
Retired Senior Citizen
For and on behalf of all Senior Citizens of the Republic of Ghana 🇬🇭

Teshie-Nungua
[email protected]