The Centre for Environmental Management and Sustainable Energy, (CEMSE) has raised serious concerns about the sustainability of Ghana’s premix fuel subsidy, which has cost the government approximately GH¢1.4 billion from 2014 to 2022.
According to CEMSE, the subsidy program is increasingly unsustainable, with projections indicating that it will balloon to over GH¢1 billion annually by 2026.
“The premix subsidy has cost the government of Ghana about Ghc1.4 billion from 2014 to 2022, with an annual average cost of Ghc163 million. The PIAC report of 2022 indicates that the government in 2022 alone paid about GH¢573.73 million, covering an outstanding GH¢142.17 million in 2021 and GH¢431.55 million in 2022. At the end of 2022, there were arrears of about GH¢37.14 million to the BIDECs. It is projected that between 2023 and 2026, the premix fuel subsidy program will increase from about Ghc802 million to Ghc1.074 billion, representing about a 33% increment.”
This financial burden is compounded by widespread issues of fuel hoarding, diversion, and overpricing, which have undermined the subsidy’s intended benefits and led to significant financial losses for the government.
“Although the government subsidizes premix fuel in Ghana, costing other petroleum product users, evidence from public documents shows that significant volumes of premix fuel are diverted into other markets, with a high probability of ending up in vehicles such as gasoline (petrol). In 2023, the Ministry of Fisheries and Aquaculture Development (MFAD) projected to supply 78 million litres of premix fuel, but the outturn was 21 million litres. Contrary to this, the National Petroleum Authority indicated that premix consumption in 2023 was 34 million litres, indicating a shortfall of about 13 million litres compared to the data from MFAD. This implies that 13 million litres of premix fuel were diverted into the market as other petroleum products by blending with other petroleum products. Premix-blended products sold in the market affect the quality of the product sold and damage machinery.”
CEMSE’s findings further reveal that the premix subsidy has failed to improve the welfare of fishing communities, despite substantial government spending. Issues such as dwindling fish catches, income decline and hazardous working conditions persist, leading to a 40% decline in the number of artisanal fishermen over the last decade.
“Lastly, the premix subsidy regime has not significantly improved the welfare of fishing communities. The Trade Union Policy for Decent Work in the Fishing Sector of Ghana, published in 2024, reports incidences of dwindling catch, dwindling income, health and safety problems, hazardous working conditions, and accidents. The report further states that there has been a 40% decline in artisanal fishermen in the last decade. This implies that after pumping over Ghc1.4 billion into subsidizing premix fuel to improve welfare, the outcome has been a deterioration of fishermen and fishing communities. Fishing communities have not benefited much from the subsidy because cartels and political cronies have mostly hoarded the product, sold it above minimum prices (subsidy prices), or diverted the products to other markets.”
CEMSE has further recommended that the government scrap the premix fuel subsidy and replace it with an output-based subsidy to better support fishermen and ensure more efficient use of national resources.
“The government should scrap the premix fuel subsidy and institute an output subsidy regime where farmers are supported based on their output. This promotes efficiency in allocating scarce national resources and increases productivity among fishermen. Output subsidy also helps the government effectively track the results of the subsidy program. This promotes sustainable management of the PSRL without it been depleted as the case could be by 2026.”
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