The average Ghanaian does not need an economics degree to know the economy is going through a very rough patch. They feel it on their commute to work and when shopping for foodstuffs.
According to the Ghana Statistical Service, the continued rise in food and transportation expenses across the country has pushed national year-on-year inflation to 23.6 per cent in April 2022.
While it is simple to blame rising fuel costs and the depreciation of the Cedi for Ghana’s high cost of living, there are other reasons that are hurting Ghanaians’ wallets.
The seven elements that contribute to the high cost of living are examined in this article.
The exchange rate is the primary, and possibly most important, element in the pricing Ghanaians confront today. Since Guggisberg’s time, Ghana’s economy has rarely changed. Our economy is based on commodities, and Ghana produces virtually little manufacturing. From refined petroleum goods to toilet paper, rice, and pharmaceuticals, almost everything is imported. This means that when the cedi weakens, prices will rise as it becomes more expensive (relatively) to import everything. This leads to the second point.
Since the start of the COVID-19 pandemic, the freight bill for a 20-foot container from China has climbed by 133 per cent, from USD1500 to USD3500, according to the Ghana Institute of Freight Forwarders. Since the outbreak of the epidemic, freight costs have been growing globally. Global freight prices have climbed by 152 per cent since January 2020, according to the Baltic Dry Index, which means the cost of transportation has increased by that much. This is a disaster in an import-dependent economy. During the same time period, the Ghana cedi had lost about half of its value. Because of these two interconnected variables, import prices have risen in relation to our national purchasing power. For pricing, the combination has been terrible.
Petrol and fuel prices have risen from just over GHS 5 per litre in April 2021 to an average of GHS 10 per litre today.
The depreciation of the Cedi against the dollar, the rise in global crude oil costs, and the tax increase on the completed product, which accounts for 29 per cent of the ex-pump price, have all contributed to this.
Fertilizer costs range from 350 to 1200 dollars per tonne.
Fertilizer prices have increased by over 400% since 2020. The price was already rising, but the crisis between Russia and Ukraine has compounded the problem. From the conclusion of the fourth quarter of 2021 to the end of the first quarter of this year, the graph below shows a nearly 100 per cent growth. The problem will only get worse as the fight drags on. As a result, consumers are paying more for food.
While these concerns have impacted many people, they have also caused certain prices to grow considerably more rapidly than usual. According to the Ghana Statistical Service, inflation in April 2022 was 23.6 per cent, the highest since August 2009, and was primarily driven by food. According to the Ghana Statistical Service’s most recent data, food accounted for 50% of inflation in the last month.
Oil and fats (43.4 per cent), water (42.1 per cent), cereal products (31.5 per cent), vegetables (30.5 per cent), fish and other seafood (27.2 per cent), fruits and nuts (29.1 per cent), soft drinks (24.7 per cent), and live animals and meat (24.7 per cent) are some of the primary food groups (28.1 per cent). With all of these prices rising faster than inflation, the food problem is becoming increasingly serious.
Transport fares are a huge source of concern for most Ghanaians. With less than 20% of Ghanaians owning cars, many rely on public transport for movement purposes. As fuel prices rise, various transport unions, most notably GPRTU and the breakaway Concerned Drivers Union, have been agitating for higher prices as fuel prices have risen. Using January 2021 as a base, in the last 17 months transport fares have risen 50%. Despite the steep increase, the fares have lagged behind the fuel prices and spare parts, which have also soared due to the forex and freight issues highlighted above.
Final goods (Non-Food)
Finally, prices for consumer goods and non-food products have increased. Nonfood inflation has lagged behind food inflation in recent years, although the increases have been substantial. Non-food inflation stayed mostly between 7% and 10% from July 2019 to the end of 2021, but it has been progressively rising since October 2021, reaching 17% in March, and another increase is likely when the April statistics are revealed. As a result, 2022 has been a disaster for consumers, as wages have not kept pace with inflation.