Many Ghanaians are reeling under the impact of higher prices of goods and services. Despite the faster hike in prices of goods and services, incomes for many have remained the same leading to deteriorating standards of living.
Affording basic necessities for low-income groups in the face of rising prices in Ghanaian parlance has become an “act of grace”. Hence the food-eating formation that has become popular on social media is either you choose 0:1:0, 0:0:1, or 1:0:0. This is a testament to how difficult the cost of living has become.
It may appear that this is just a social media joke or trend which does not reflect reality. Begin to have a rethink if you believe same. The 8th Ghana Economic Update published by the World Bank in June this year revealed that people living below the poverty line have significantly increased as a result of the high cost of living among other factors.
Persons living below the international poverty line of $2.15 a day (equivalent to GHC34) have increased to 30.3% of the population. This means close to 10 million of Ghana’s 31 million population are living below the poverty line as a result of harsh living conditions. With the situation, the World Bank projects the figure to increase to 33.2% by next year (2024). That is how bad the situation could become.
The Common Factors
It has become the norm that the first point of blame when prices of goods and services are hiking in Ghana is the exchange rate. Occasionally, fuel price increments also take a fair share of the blame as any hike in global crude oil prices leads to higher transportation costs which all rational businesses pass onto consumers. A hike in transport fares also means an increase in the price of food items.
Supply chain disruptions, in other words, shortages which are normally caused by delays in logistics, and poor infrastructure can limit supply. Hence following the basic economic principle that if demand exceeds the supply, the market itself will automatically increase prices.
Equally important in this conversation is increased taxes, levies, or tariffs on goods and services which can also make prices more expensive. For instance, Value Added Tax (VAT) increases often result in higher consumer prices.
These and many other factors, on a normal day become “the whipping boys” when Ghanaians are experiencing prices that are breaking the roof. But one important factor that the minds of consumers have been averted to is intra-border trading. It is emerging that a significant portion of Ghana’s price build-up on the market is a result of this intra-border trader.
Intra-Border Trade in West Africa
As part of efforts to promote economic integration, regional development, and market expansion, the Economic Community of West African States (ECOWAS) has been a champion of intra-border trade. ECOWAS is a promoter of the exchange of goods, services, and resources between countries within the region. This has led to the rise of cross-border transactions among members of the ECOWAS region.
To enhance such a cross-border trade, ECOWAS has established what has come to be known as ECOWAS Protocols to facilitate transactions and movements. These are agreements that seek to eliminate or minimize trade barriers, custom requirements, and quotas among others to ensure the free movement of goods and services among member states.
Ghana’s Involvement in Cross-Border Trade
As one of the largest economies in West Africa, Ghana plays a very crucial role in cross-border trade within ECOWAS. Traders, both large and small-scale, trade goods ranging from food products, textiles, and electronics among others between neighboring countries like Nigeria, Cote d’Ivoire, Burkina Faso, Niger, Mali, and Benin among others.
The President of the Ghana Union of Traders Association (GUTA), Dr. Joseph Obeng reveals to The High Street Journal that about 70% of his members do not import their goods from outside the continent but within the ECOWAS region with Togo, Benin, and Nigeria being the common destinations.
“Most of our women folks and most of our traders do not go outside Africa to buy goods. About 70%, they ply this route; Togo, Benin, and Nigeria,” the President of GUTA revealed. This is corroborated by the Ghana Export Promotion Authority (GEPA) that the value of Non-Traditional Exports (NTEs) to the ECOWAS region in 2019 was $837 million. with a significant value of imports.
The Pricing Impact in Ghana
Trading within the region is one significant cause of the rising prices in Ghana, business leaders say. The economic situation in these countries, which isn’t too good, is negatively affecting the pricing of traders in Ghana.
These neigbbouring economies where most of the traders import their goods are experiencing rising inflation and unstable exchange rates among others which are leading to higher prices in these countries.
The already high prices of goods in the neighbouring countries are then exacerbated by Ghana’s own challenges when they arrive in the country.
Economic challenges such as inflation, depreciating cedi, taxes, and others are factored by these traders in their pricing of the goods that were already imported at a higher price. To put it simply, the Ghanaian consumer is bearing the brunt of “double inflation”. First, from the importing country, and secondly, Ghana’s own inflationary pressures among other factors.
Dr. Joseph Obeng explains to The High Street Journal that “one thing that Ghanaians have not noticed and observed is that most of the price hikes that we experience in this country are also imported from the cross-border trading that we do. You know, the economy of Nigeria is also not good.”
He added, “If the prices of goods go up in these destinations, then it also affects aside the fact that the exchange rate is also a major factor so this is also part of the price hikes that we see that most people have not observed. When most of our traders go to Nigeria they encounter a lot of high prices of goods and so those prices having gone up will definitely trickledown when they bring those goods to Ghana.”
“The hikes that we experience, most of them are also imported and then alongside the high exchange rate that we experience in the depreciation of the cedi,” the businessman concluded.
The Way Forward
It is clear that without flourishing economies which can lead to stable prices, trading within the sub-region will not inure to the benefit of consumers. West African economies must therefore prioritize ensuring stability in inflation, exchange rate, and reduction in taxes to reduce prices.
In addition, the government and regional bodies like ECOWAS should ensure a harmonized pricing policy across member states. This can be achieved through agreements on price stabilization mechanisms and reducing trade barriers such as tariffs and non-tariff measures.
In addition, import substitution can help Ghana reduce price hikes caused by cross-border trade. By encouraging the production of goods locally, the country can drastically minimize the over-reliance on imports from the sub-region. When Ghana makes more of what it needs, such as food, clothing, or machinery, it won’t be affected by the high costs of importing goods as a result of the country of origin’s inflation.
