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04.03.2005 General News

Muted protests to government hike in oil prices

By IRIN

ACCRA, 4 Mar 2005 (IRIN) - The Ghanaian government's move to cut back on oil subsidies by raising consumer fuel prices 50 percent has got residents grumbling but there is no sign of the crippling strikes that the Nigerian government was confronted with when it tried similar tactics.

As of 18 February, a gallon of premium petrol in Ghana costs 30,000 cedis (US$3.33) compared to 20,000 cedis (US$2.22) previously and similar price hikes have come into effect for kerosene, diesel and other fuels.

The Energy Ministry has taken out newspaper advertisements with charts showing that Ghana's fuel prices are the lowest in West Africa after Nigeria and officials say price increases are necessary to scale down government subsidies and pump the cash into the health and education sectors instead.

The National Petroleum Tender Board says that if the government axed its subsidies entirely and left pricing to be determined by the market, Ghanaians should really be paying 40,000 cedis (US$4.44) a gallon.

But these arguments cut little ice with ordinary people in Ghana, where those on the minimum daily wage must work at least three days to be able to afford a gallon of petrol.

Residents in the capital Accra are already feeling the pinch after just two weeks of the price hikes.

"Things are difficult. Since the fuel prices went up, people say they cannot even afford the 30,000-40,000 cedi price range of my shoes," said 37-year-old George Graham, who sells second-hand shoes. "If it gets worse, I will move to Togo or Cote d'Ivoire despite the problems there."

Times have also got tougher for 28-year-old taxi driver William Okyere.

"I now buy petrol when I need it instead of filling my tank before I start work," he told IRIN. "I am now putting in more hours than the 10 hours a day I used to work, just to meet my operating costs."

Inflation also on the up?

Economists point out, that like many countries, fuel prices have a big effect on the cost of living in Ghana and they say they expect inflation to rise in March.

Official transport fares in Accra have already soared 30 percent in line with the dearer fuel, but some private taxi drivers and bus operators have hiked their prices even more, and residents report scuffles with passengers who refuse to pay more than the published tariffs.

Earlier this week, the opposition organised a march through the capital to protest the fuel price increases. But the show of people power was in the hundreds not thousands and was a far cry from the protest strike called by Nigeria's opposition last October which paralysed several of the country's big cities.

Nigerian President Olusegun Obasanjo began to phase out fuel subsidies as part of his policy of deregulating Nigeria's downstream oil sector, insisting the reforms are necessary to eliminate domestic fuel subsidies of over US$2 billion a year.

But during his five years in office, the opposition trade union, the Nigeria Labour Congress has called six general strikes in response to fuel price hikes. In November, a threat to strike again brought about an eleventh hour offer from the government to cut prices by 10 percent.

In Ghana, however, reaction is more muted, although the main opposition party, the National Democratic Congress (NDC), has threatened to take further action if the government does not back down.

"We have given the government up to 7 March to review the price hike otherwise we will continue with the street protests as well as other alternatives," Harruna Iddrissu, a NDC member of parliament, told IRIN.

Gradual approach?

The opposition concedes that price rises are necessary but favours a more softly-softly strategy.

"We would have adopted a more gradual and sensitive approach, especially taking into consideration that any increase in petroleum pricing adversely affects every sector of the economy," Iddrissu said. " We would not have pushed the increases beyond 25,000 cedis (US$2.77)."

Ghana's government has proceeded cautiously this time around, compared to 2003 when it hiked fuel prices by 92 percent, which sent inflation soaring.

"I believe that was what persuaded the government to limit the increases to 50 percent since it clearly will not want the aftermath to impact negatively... and undermine the economy," said Daniel Ogbamey Tetteh, a senior analyst at Databank Financial Services in Ghana.

"While the price increases are inevitable, we think the severity of the price hike would have been lessened if it was done progressively last year. But we know this could not be effected for political reasons, last year's elections," Tetteh said.

Ghana's President John Kufuor won a second four-year term in office in December elections.

During his first term, strong world prices for cocoa and gold, two of Ghana's main exports, helped push economic growth up to over five percent a year but many people in this county of 19 million remain desperately poor. Nearly 45 percent live below the official UN poverty line of less than a dollar a day, and average per capita income is just US$ 304 a year.

Presenting the 2005 budget last week, Finance Minister Kwadwo Baah-Wiredu said the government expected to put about 229 billion cedis (US$25.4 million) back into people's pockets as disposable income to soften the impact of the fuel price hikes.

He noted that the daily minimum wage would go up to 13,500 cedis (US$1.50) from 11,200 cedis (US$1.24 ) and there would be a reduction in income tax for some groups. In addition, school fees at government-run schools would no longer have to be paid by parents and more low-cost houses would be constructed.

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