Connect with us

Business

Taxes form 40% of cost of fuel, take off the levies if you want cheap fuel – Sam George

Published

2 years ago

on

Ningo Prampram Member of Parliament Samuel Nartey George has told the government to take off the taxes on petroleum products in order to reduce fuel prices.

Sam George indicated that 40% of the cost of fuel is government taxes therefore if the government wants cheap fuel it should remove those levies.

“If you want to see cheap oil, you don’t need to trade gold, you just need to have the government take off the taxes. 40% of the cost of fuel government taxes,” he said on the Big Issue on TV3 Monday, February 6  while contributing to a discussion on the Gold-for-Oil initiative.

Last year, the Vice President, Dr. Mahamudu Bawumia, announced a new government policy dubbed Gold for Oil.

The policy, as explained by government, is to allow government pay for imported oil products with gold, in a direct barter with gold purchased by the Central Bank.

The move, announced by the Vice President in the midst of depreciation of the Cedi against the US Dollar and the rising cost of fuel prices, was explained as an intervention to help stabilise prices of fuel products, as well as reduce pressure on Ghana’s foreign exchange, as the direct gold barter would be the mode of paying for imported oil instead of depleting the foreign exchange reserve.

The Gold for Oil programme has since been implemented with the first oil consignment  arriving last month.

Below is everything you need to know about the policy, as explained by the government:

Introduction:

1. The Gold for Oil (G4O) Programme is an initiative of the Government of Ghana to use the existing Bank of Ghana (BoG) Domestic Gold Purchase (DGP) Programme to support the import of petroleum products into Ghana.

2. The prime objective of the programme is to use additional foreign exchange resources from the BoG’s DGP programme to provide foreign currency for the importation of petroleum products for the country which currently stands at about USD350 million per month.

3. The government has begun the implementation of the G4O Programme where gold purchases under the BoG’s DGP Programme mainly through the Precious Minerals and Marketing Company (PMMC) and where required from aggregators and mining firms is used to purchase petroleum products.

4. This is intended to free up foreign exchange resources to meet petroleum imports of the country thereby reducing pressures on the Bank of Ghana’s foreign reserves and the banking sector emanating from the Bulk Import, Distribution and Export Companies (BIDECs) request for foreign exchange.

5. The programme also aims to procure petroleum products at very competitive prices through Government-to-Government (G2G) arrangements. The programme will ensure that the cost of importing the products from international oil traders will always be comparatively lower.

READ ALSO:  PURC heads to Tamale for crunch meeting with VRA/NEDCo staff

6. The consequent reduction in foreign exchange pressures, the reduction in premiums charged by international oil traders as well as efficiency gains from the value chain will translate to lower ex-pump prices in the country. The G4O Programme Process Flow and Requirements:

7. Under the programme, all the dore gold produced and exported by companies with licensed small-scale concessions including community mines through the PMMC shall be purchased by the BoG. The Ministry of Lands and Natural Resources has issued directives towards the realisation of the programme.

8. The purchased dore gold is used for the payment of oil supply to Ghana. Payment for oil supply is to be done in two channels: by way of barter trade or via broker channel.

The Barter Channel:

• For suppliers willing to take gold in direct exchange for petroleum products, BoG will provide equivalent volume of gold. Both the Bank and the International Oil Trading Companies (IOTCs) are required to open Gold Metal Accounts in a mutually agreed gold refinery for the purpose of gold transfer.

• BoG accumulates refined gold in its metal account at a refinery nominated by a supplier to fund petroleum product shipments.

• BoG transfers equivalent amount of gold based on petroleum products supply invoice from its metal account to a supplier’s metal account on receipt of Quality Certificate (QC) of the product supplied and final invoice from Bulk Oil Storage and Transport Company (BOST). The Broker Channel:

• BoG executes a Gold Supply Agreement under which it sells gold to a gold broker, which provides forex cover to pay for petroleum products.

• Gold Broker buys dore gold from BoG and deposits the proceeds in BoG gold holding account.

READ ALSO:  Morocco 1-0 Ghana: Abalora mistake leaves question marks on Ghana’s goalkeeping choices

• BoG transfers funds from gold holding account to an Escrow Account to pay for petroleum product shipment on receipt of QC and final invoice from BOST.

9. BOST, a state company, operates as an off taker for petroleum products, and therefore executes an agreement with IOTCs for the import of petroleum products to Ghana, for onward sale to licensed BIDECs.

10. BIDECs buy directly from BOST with cash and or a letter of credit (guarantee) from a reputable financial institution.

11. BOST and the National Petroleum Authority (NPA) ensure that the cedi proceeds from the sale of imported petroleum products will be collected and deposited with a collection bank in favour of BoG. The collection bank is required to transfer collected funds into BoG’s G4O proceeds account within 48-hours which is then used to fund the next cycle of gold purchases.

Pricing of Products:

12. To ensure that the price of petroleum products imported under the G4O programme reflects at the pumps to benefit the consumer, the NPA will regulate the prices of these products in the interim to correct market failure until the policy matures.

13. NPA will work with BOST to negotiate prices with the international oil traders to ensure that the landed cost of products procured under the programme are always competitive. NPA will approve the IOTC that will be selected to supply products to BOST under the programme based on the competitiveness of the offers made by them. BOST will sign supply contracts only after approval has been granted by the NPA.

14. The price at which BOST will sell the products to BIDECs will be approved by the NPA. The price at which the BIDECs will sell the products to Oil Marketing Companies (OMCs) will also be approved by the NPA.

15. The applicable exchange rate for pricing the products supplied under G4O will be based on the average rate at which the gold was purchased from the licensed gold exporters by BoG.

READ ALSO:  Many people still don’t understand my ‘every Ghanaian’ll get bank account’ comment – Bawumia

16. The NPA will put measures in place to ensure that OMCs that lift products supplied under the G4O programme pass the price on to consumers accordingly. In this respect, BIDECs and OMCs who lift and supply G4O products will sell at the ex-refinery and ex-pump prices that will be determined by the NPA. If there must be a comingling of products supplied under G4O and other sources, the ex-refinery and ex-pump prices will be computed using a weighted average.

17. All BIDECs and OMCs who wish to purchase products under the G4O programme will be required to sign off an undertaking confirming their willingness to comply with the terms and conditions for partaking in the purchase and sale of G4O products.

18. To ensure that the impact of the G4O programme on ex-pump price will be significant and effectively monitored, the number of BIDECs and OMCs who will be permitted to lift G4O products will be controlled. Payment Structure:

19. BOST will be required to pay for products supplied to it under G4O into an Escrow Account at BoG within 60 days of receipt of products from the international oil traders.

20. BIDECs will be required to pay for products procured from BOST within 15 days of loading. Payment for the products will either be on a cash basis or with a 15-day letter of credit (LC) from reputable commercial banks.

21. BOST will be required to provide BoG with copies of the LCs from BIDECs for verification and to give BoG the assurance that receipt of payments will be made on agreed dates.

Laycan Allocation for Product Imports:

22. The NPA will ensure that adequate laycan slots are allocated to BOST to import products under the programme.

23. NPA will advise BOST on the projected demand on a monthly basis.

Related Topics:
Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Ghana Reports First Oil Output Increase in Five Years With Production Rising By 10.7%

Published

2 weeks ago

on

November 8, 2024

By

Ghana has recorded a 10.7% increase in crude oil production in the first half of 2024, marking a reversal in a five-year trend of declining output, according to a report by Ghana’s Public Interest and Accountability Committee (PIAC).

The growth was largely driven by the Jubilee South East (JSE) project, managed by Tullow Oil, which began production in late 2023. This addition to Ghana’s Jubilee oil field helped boost production to 24.86 million barrels by June 2024, compared to a 13.2% decline over the same period in 2023.

PIAC’s half-year report also highlighted a significant rise in petroleum revenue, which surged by 56% year-on-year to $840.8 million by mid-2024. Ghana, a country that began oil production in 2010, depends on petroleum revenue for around 7% of government income. The report further noted a 7.5% increase in gas output, reaching 139.86 million standard cubic feet by June.

Despite the positive trend, Isaac Dwamena, coordinator of PIAC, cautioned that Ghana’s petroleum sector faces both technical and financial challenges. Ghanaian law requires oil companies to allocate at least 12% of project shares to the state, a mandate Dwamena noted can deter investment due to the high cost. “The state can take 15%, 20% carried interest based on negotiations, and that has been a disincentive,” he explained.

To further drive production, Ghana is planning to sell more exploration rights, aiming to harness its fossil fuel resources while also generating funds to support its energy transition. Major oil companies operating in the country include Eni, Tullow Oil, Kosmos Energy, and PetroSA.

Continue Reading

Business

President urges universities to strengthen ties with industries

Published

3 months ago

on

August 23, 2024

By

President Nana Addo Dankwa Akufo-Addo has called on universities in Ghana to strengthen ties with government, industries, and the communities they serve to ensure that researches are aligned with the needs of society.

That would contribute directly to the realisation of national development goals, he said.

The President made the call at Nyankpala during a ceremony to inaugurate a three-storey multi-purpose building for the University of Development Studies (UDS).

The building fulfills the President’s promise to the UDS during its 25 Anniversary celebrations.

It is named the “Silver Jubilee Building” in remembrance of the President.

The facility boasts of offices, conference halls, lecture theaters, and houses some faculties of the university.

President Akufo-Addo said universities were “breeding grounds” for ideas, researches and innovations that drove the nation’s progress and should remain actively engaged in the development process.

He said government believed in educating the population as the bedrock of a thriving democracy, a vibrant economy and a just society.

The President, thus, outlined some policies implemented aimed at improving access to education at all levels, which included the “no guarantor policy”.

He said the policy had improved access to tertiary education as it had eliminated financial barriers that historically prevented brilliant students from pursuing higher education.

The “no guarantor policy” for student loans increased the numbers of students seeking tertiary education from 443,978 in the 2016-2017 academic year to 711,695 in the 2020-2023 academic year, an increase of 60.3 per cent.

President Akufo-Addo said his government had extended considerable energy and resources to the education sector, recognising it as the most powerful tool to transforming the nation.

He said: “The considerable budgetary allocations within the period totaling some GH¢12.8 billion, amply demonstrates the shared determination of the Akufo-Addo government to ensure that education becomes a catalyst around which the transformation of our nation revolves.”

Source: GNA

Continue Reading

Business

We’ve learnt our lessons; we won’t borrow to finance 2024/2025 crop season

Published

3 months ago

on

August 21, 2024

By

The Ghana Cocoa Board (COCOBOD) has announced that it will transition to self-financing for the 2024/2025 cocoa crop season, starting in September 2024.

For the past 32 years, COCOBOD has relied on offshore borrowing to finance cocoa purchases through its cocoa syndication programme. However, the organization is shifting its strategy to reduce dependency on external funds.

Speaking to the media on Tuesday, August 20, COCOBOD’s CEO, Joseph Boahen Aidoo, explained that this new approach is expected to save an estimated $150 million.

“Is it good that always COCOBOD should be heard going to borrow? Are we comfortable with that tag? Today, you have heard that COCOBOD is not going to borrow. It is quite a good time for any human being to learn his or her lessons.

“In 32 years, we have learned our lessons and we think that it is high time we wean ourselves from the offshore international financial markets and then finance the crop ourselves here and that is exactly what we are going to do. And I think it comes with a lot of projectory benefits.

“We are looking for $1.5 billion this crop season and looking at the interest rates last year, which were over 8 percent, plus the cost, it means that we can save more than $150 million by the decision not to go offshore.

He also denied assertions that COCOBOD was short-changing farmers with its pricing of cocoa.

“It is not true that COCOBOD is not giving the farmers a fair price. If you follow the narrative, you will notice that from 2017 on, COCOBOD has even been more than fair.

“The government had been more than fair to farmers because this was a time when prices had collapsed but the government and COCOBOD did not reduce the farmers’ price.”

Continue Reading

Trending