– Maintaining fuel pump prices could cost gov’t FCFA 672 billion in 2022
By Norbert Wasso with additional reports from Business in Cameroon
As fuel prices ramp up in the international market, the Cameroon government finds itself in a tight corner over whether to increase fuel pump prices or not. The decision is a very critical one due to the fact that an increase in fuel prices would imperil an already worsening situation which has seen prices of basic commodities climb the ladder.
Only weeks ago the prices of wheat flour and bread increased to the chagrin of households. Other commodities such as sugar, palm oil agricultural inputs, cement are either scarce or the prices have jerked up.
Maintaining the fuel pump prices with subsidies is expected to cost the Cameroonian government FCFA672 billion this year. The information was reported this week by the Minister of Commerce, Luc Magloire Mbarga Atangana.
According to data provided by the Cameroonian Employers’ Association,GICAM the price of a barrel of crude oil, (a raw material used to produce super, diesel, and kerosene) on the international market rose from $51 to $91 (+78%) between January 2021 and January 2022 and reached $139 per barrel in March 2022 as a result of the Russian-Ukrainian conflict.
This is the highest level since the 2008 crisis.
The price of natural gas which is used to produce domestic gas and maritime freight have exploded, negatively impacting the Cameroonian oil sector, which is dependent on imports of finished petroleum products since the country’s only refinery SONARA burned down in 2019. Since Cameroon has been importing refined products, the equilibrium price has fallen from $55 to $40, according to simulations made by the Hydrocarbon Price Stabilisation Fund, CSPH. That means when world prices go beyond that, the current prices charged at the pump generate losses that must be compensated by the State.
The Minister of Commerce informed that the price of a litre of super gasoline is FCFA1,016, while it continues to be sold on the local market at FCFA630. A litre of diesel should normally cost CFA1,027 but is FCFA 575 on the market. The price of kerosene should be FCFA849 but is FCFA350. Also, the12 kg cylinder of domestic gas should be sold at FCFA13,277 but is sold at FCFA 6,500.
To continue to subsidise the fuel this year, given the current global context, the government will spend FCFA253 billion on super fuel, FCFA376 billion on diesel, CFA43 billion on oil, and FCFA70 billion on domestic gas.
GICAM calls for price increase for basic goods
During a meeting held last March 18 in Yaoundé with the government, economic operators, and the civil society, the employers grouping of Cameroon (Gicam) called on authorities to increase the prices of beverages by FCFA 50 (+8%).
The measure is part of a set of proposals aimed at cushioning the tough global economic situation, which translates into the increase in prices of raw materials, freight, fuel, and fertilizers.
Gicam said the proposed price adjustment of “FCFA 50 (all taxes included) on a recommended public price of FCFA 650 for the 65 cl bottle” will recover FCFA28 billion of the additional FCFA 35 billion recorded on import bills between 2020 and 2022 in the brewing sector.
The higher import cost is the result of the explosion of raw material and freight prices on international markets, after the mitigation of the Covid-19 pandemic and the outbreak of the Russian-Ukrainian conflict in late February 2022.
“The brewing industry primarily relies on imported raw materials, packaging, equipment, and spare parts, as local supply is either insufficient or non-existent (…) Its dependence on imports for about 50% of its production cost means that it is exposed to exogenous factors,” Gicam explained. It is estimated that as a result of inflation on the global market, the prices of the main raw materials used by brewing companies (malt, sugar, grits, preform, monopropylene, screw caps, etc.) have increased by 10 to 201%. At the same time, sea freight has skyrocketed by 300% from Asia, and by 200% for shipments from the European continent.
This has led to a 20% increase in production costs per hectoliter of brewery products, causing the sector to lose more than FCFA 44 billion CFA francs, as beverage prices have not been adjusted, according to Gicam. As a reminder, the Minister of Commerce, Luc Magloire Mbarga Atangana, announced last March 15 that the government has approved an increase of FCFA 5,000 in the price of a 50-kg bag of wheat flour, and FCFA 25 in the price of a 200g baguette. According to the official, the government decided on such a measure after wheat prices exploded since the beginning of the Russian bombing of Ukraine in February 2022.
Official data shows that 35% of the wheat consumed in Cameroon comes from Russia.