The fuel levy brouhaha and the price of “ambush” policy

By UTCHE OKWUOSAH

Overview

Whichever way one looks at the current energy sector challenge, and the proposed GH₵1 fuel levy solution, one cannot wish away the fact that the government of Ghana, in the first instance, direly needs some fiscal space now to sufficiently address numerous pressing economic responsibilities confronting it. Hence, reasonably so, the government cannot, at this moment, countenance any suggestion of committing itself to additional borrowing, especially at this early stage of its assuming office, not to talk of piling up the already existing debt.

So, aiming to seize the opportunity of the moment, as presented by the current appreciation of the cedi, the government had to think of dealing decisively and urgently with the irrepressible question of, amongst all the available variables in their basket of solutions, how could the gains of the appreciating cedi be harnessed to provide the needed funding for the ailing energy sector without hurting the public and the productive sector?

Apparently, with the scenario now playing out, the fuel levy option emerged as the most conveniently implementable and, according to the government, the only one that would cause the public no pain, in the short term.

The Burden of The Energy Sector

The energy sector, already under the weight of over US$3.1 billion debt, requires an additional US$1.8 billion of financing in order to afford the fuel needed for thermal power generation subsequently.

The Finance Minister, Dr. Cassiel Ato Forson, hurriedly appearing before the parliament, in a fashion that was later described by industry stakeholders as rather surreptitiously, had sought to convince the Parliament to amend the Energy Sector Levies Act, in order to create the legal platform that allows the government to implement their fuel levy policy that enables them to generate the required funds for the energy sector from the cedi windfall.

“Mr. Speaker…the impact will be absorbed by the gains made from the strong performance of the Ghana cedi, and this will mean that consumers will not have to pay extra for the price of petrol and diesel beginning today. Our simulations suggest that there will be no increase in the ex-pump price of petrol and diesel in the next window, beginning today, if the levy is imposed,” the Minister had asserted with assurance.

Further justifying the choice for the levy option, Dr. Forson had argued that the option of including fuel costs in the current electricity pricing structure could impose a 50 per cent burden on consumers. Conversely, however, the option of increasing the already existing fuel levy by GHc1, proved (after their “simulation”) to be the gainful and less painful option for the generation of the funds required to meet the funding need of the power sector, and still provide enough for defraying the outstanding energy sector debt. 

He said that the levy, projected to generate GH¢5.7 billion annually, will serve as a dedicated source of funding to the power sector, and that the proceeds would be earmarked for the procurement of essential fuel for power generation.

“…The new levy on petroleum prices would be neutralised by the strong performance of the Ghana cedi…” the Finance Minister stressed assuringly.

“…I repeat, the impact will be absorbed by the gains made from the strong performance of the Ghana cedi, and this will mean that consumers will not have to pay extra for the price of petrol and diesel beginning today. Our simulations suggest that there will be no increase in the ex-pump price of petrol and diesel in the next window, beginning today, if the levy is imposed,” he asserted categorically.

Crux of The Matter

However, all said and done, the main crux of the matter apparently turns out not to be in just the fact of the imposition of the levy itself but in the seeming surreptitious manner, the government adopted in casting the responsibility upon the stakeholders without the necessary pre-consultation as ought to have been the case.

Therefore, the avoidable grouse that caused the recent uproar amongst the public (households and commercial entities) was easy to pick out from most of the dissenting arguments put forward by, especially the aggrieved organized stakeholders.

From the transport owners and drivers’ associations, to the petroleum industry associations, the positions were the same – why didn’t government arrive at the decision through consultations with stakeholders? This would have allowed all key interests to put forward their concerns which would have formed part of the variables considered in the course of arriving at the specifics of the final decision.

In a press release dated June 4, 2025, the Chamber of Oil Marketing Companies (COMAC) had, amongst other concerns, admitted their understanding of the need for government to seek funds with which to meet the funding need of the well-known ailment of the energy sector, but they could not understand why the government chose to go about it the way they did.

“COMAC reaffirms its unwavering commitment to supporting the recovery of the national energy sector, a responsibility OMCs and LPGMCs continue to uphold through consistent remittance under the existing Energy Sector Levies Act. However, the increase was introduced without adequate stakeholder consultation…” despite the sector’s strategic importance and contribution to the economy.

Subsequently, they had implored the Ministry of Energy and Green Transition engaged, with all relevant agencies, to explore balanced and workable policy solutions.

“We urge government to collaborate with industry stakeholders to ensure that fiscal policy decisions reflect operational realities – protecting business survival, promoting energy equity, and advancing Ghana’s development agenda,” the COMAC release further stated.

Again, speaking after the recent launch of the 5th Chamber Business Awards earlier in the month of June, the Chief Executive Officer of the Ghana National Chamber of Commerce and Industry (GNCCI), Mark Badu-Aboagye, acknowledged the strategic and reasonable intention of the levy but failed to understand why government chose to go about it the way they did without, first of all, seeking means to factor in how executing their good intention would affect relevant stakeholders.

Mark Badu-Aboagye, CEO, GNCCI. Photo: GNCCI

“The intended purpose of the levy is very relevant in supporting the energy sector and addressing its mounting debt. However, I take issue with both the timing and the rate of the increase. The rate of about 8% of the current price per litre is quite high,” Mr. Badu- Aboagye was quoted as saying by a local newspaper.

“The private sector is eager and prepared to collaborate with the government to boost production, reduce imports, and expand exports. For this to be effective, there must be deeper engagement, shared goals, and a strong mutual commitment between policymakers and the business community,” he had emphasised.

As stated earlier, the two opinions illustrated above did not differ from those of the various stakeholders, including the general public, interviewed by the media in the course of the public discuss that trailed the policy move.

Therefore, the bone of contention in the fuel levy policy is not in the imposition of the levy alone, but the seeming undemocratic and insensitive manner the government went about it. Due consultation, as is very important in instances such as this, was grossly overlooked. That was what really caused the public uproar.

The importance of prior consultations in taking decisions, or in policy formulations, on matters directly affecting the public and strategic stakeholders can never be overemphasized. In governance, as we have just witnessed, such a leadership flaw could be costly.

However, as was reactively demonstrated by the government, through different fora – media discussion platforms, interviews, etc., the government showed that it was a “listening government,” as it agreed to retrace its steps and meet with key stakeholders to listen to their concerns and, possibly, amend aspects of the policy, especially in the timing of the policy’s execution.

Final Words

It is, however, important to remember that the harbinger of this window of opportunity to recover and reset the ailing energy sector is the recent reversal of the upward performance of the value of Ghana’s cedi. It is what is referred to in the money market circle as a “windfall.” It is, therefore, important to note that windfalls do not last forever, especially when it concerns the value of a currency that is fundamentally determined by other dynamics in a nation’s economy. Therefore, caution and foresight in management and projection is highly recommended in counting the chickens here.

The words of Dr. Elikplim Kwabla Apetorgbor, the Chief Executive of the Independent Power Generators of Ghana, in one of his essays – Cedi appreciation: A strategic windfall for energy sector recovery and ECG’s solvency – is noteworthy:

“The appreciation of the Ghanaian cedi in the first 5-month of 2025 is not just a currency event — it is a strategic inflection point for Ghana’s energy sector. (The) ECG (Electricity Company of Ghana), which has long been suffocated by forex-linked payment obligations, now has an opportunity to stabilize its finances, reduce arrears (depending on PPA payment terms), and reclaim a path to operational solvency.

“However, this opportunity must be seized with foresight and urgency. Without strategic financial planning, structural reforms, and regulatory coordination, the gains from the GHS appreciation may dissipate into short-term relief without lasting impact.

“The task before ECG and the Ministry of Energy is clear: institutionalize the gains, convert savings into structural improvements, and prepare the system for resilience against future currency shocks.”

In appreciation of the concern of the likes of Dr. Apetorgbor, and that of the entire Ghanaians, President John Dramani Mahama, while speaking at the Jubilee House during the presentation of the final report from the National Economic Dialogue, had made this assurance:

“Every pesewa will be accounted for. The fund will undergo regular audits, and reports will be made public. We owe it to Ghanaians to ensure that this money is used for its intended purpose.”

Further assuring that the government would see to it that inefficiencies in energy procurement and distribution are reduced, he also shared some of his administration’s concerns and plans.

 “As we successfully transition to greater gas utilisation in our energy generation, we will be able to redirect more of the levy proceeds towards clearing the accumulated legacy debts that have plagued our energy sector for years.”