Ghana is a net importer of crude oil. It’s used to fuel cars and machines, and to generate electricity.
Last year we were spending an average of $400 million a month on crude oil imports. The average price of crude on the international market was around $65 per barrel in 2025.
If oil prices should hit say $120 per barrel due to this American/Israeli – Iranian war, it means we may need about DOUBLE the Dollars we use a month in importing THE SAME quantity of oil.
So instead of the $400 million average, we will be needing about $800 million, which translates to about $10 billion a year instead of last year’s $5 billion
𝗧𝗛𝗘 𝗘𝗙𝗙𝗘𝗖𝗧 𝗢𝗡 𝗧𝗛𝗘 𝗘𝗖𝗢𝗡𝗢𝗠𝗬
Inflation will rise since fuel prices will go up. It will affect transportation costs, food prices, etc.
Electricity and water tariffs will go up since both use a lot of fuel for generation and supply.
The cost of a lot of imported goods will rise
since the crude oil prices affect the whole world.
But most importantly, it will mean a heavy toll on our forex reserves and Forex (Dollar) requirements.
We will need MORE DOLLARS to import the SAME QUANTITIES of goods we import and the more the situation persists the more we will be in trouble
Consequently, and subsequently the law of Demand and Supply will kick in.
The Cedi will depreciate as our reserves have a limit.
This is a simple explanation of the effect of external and exogenous factors on our economy
𝗧𝗛𝗘 𝗥𝗨𝗦𝗦𝗜𝗔–𝗨𝗞𝗥𝗔𝗜𝗡𝗘 𝗪𝗔𝗥 & 𝗛𝗢𝗪 𝗜𝗧 𝗔𝗙𝗙𝗘𝗖𝗧𝗘𝗗 𝗡𝗔𝗡𝗔 𝗔𝗗𝗗𝗢’𝗦 𝗚𝗢𝗩𝗧 𝗜𝗡 𝟮𝟬𝟮𝟮
Ladies and gentlemen, this is exactly what happened in 2022 when the Russia and Ukraine war started
Fuel shot up to $120 in no time because Russia is a large oil exporter and their crude oil was banned.
Ukraine is a large exporter of wheat (flour), fertiliser etc., and the war meant production ceased or reduced greatly so prices hiked.
Ghana thus needed a lot more Dollars for the SAME quantity of Crude Oil, Flour, Fertilizer etc. As it dragged on our Forex cover (reserves) naturally depleted.
Oil companies, everyday importers etc., started chasing the Dollar and before we knew it, the Dollar which was going for ¢6.2 in Feb 2022 hit ¢14.5 before the end of that year.
This is what caused massive inflation, high cost of living, economic downturn etc., leading to the IMF programme, Debt Exchange and all the unpleasantness that followed.
𝗕𝗔𝗪𝗨𝗠𝗜𝗔’𝗦 𝗦𝗢𝗟𝗨𝗧𝗜𝗢𝗡𝗦
Two Initiatives from DR BAWUMIA helped us avoid a worse situation and those initiatives are what will help us a lot in our current situation if this war drags and oil prices continue soaring.
Those are the Gold for Reserves and the Gold for Oil (which we may have to return to if the situation gets worse)
I will explain them in more detail in a subsequent post
But anytime someone dismisses the effect of the Russia-Ukraine war on our economy, note that the person is just IGNORANT!!
Writer……Kwaku Addai Tardieh
