Increase
In Fuel Prices, An Economic Quackmire
By
Ernest Chefon Ndukong
Cameroon’s
Head of State, Paul Biya, hinted in his traditional end-of-year address to the
nation on December 31,2023, a possible increase in fuel prices. This was aimed
to cushion the state’s subsidy burden on petroleum products, signalling a
contribution of about FCFA 640 billion in 2023, dropping from over FCFA 1,000
billion in 2022.
The
recent government announcement resulted from an increase in fuel pump prices in
February 2023 of circa 16 percent and 25 percent for Super and Diesel,
respectively.
On
Friday, February 1, 2024, the Minister of Trade, Luc Magloire Mbarga Atangana convocated
a consultative meeting for February 2, 2024, with trade union organisations in
the presence of the Ministers of Labour and Social Security, Transport, Water
and Energy and representatives of Defence and Security forces.
The
result of this consultation was a further 15 percent increase in fuel pump
prices to FCFA 840 and FCFA 828 for Super and Diesel respectively. This
translates to circa 33 percent and 44 percent increase prior to February 2023
for the respective fuel products.
Consultation
Or Information?
Whether
the above session was consultative or informative is unknown to the ordinary
Cameroonian. In the last quarter of 2023, the Minister of Trade, Luc Magloire
Mbarga Atangana, held several meetings with concerned stakeholders after which
the price of bread was reduced from FCFA 150 to FCFA 135. These sessions with
Union of bakers could be interpreted to represent a consultation.
The
Place Of Planning
The
new fuel prices were notified just few hours to the effective date, leaving no
time for economic operators and fuel consumers to properly strategise on how to
limit the negative consequences that such a major expense head could have on
their activities. Businesses with approved budgets would immediately start
experiencing overspends while individuals will be forced to cough out more from
their generally limited resources. This action disregards the benefits of the
place of planning, however this may have affected only the spender as the State
might have considered it in its yearly subsidy savings for the 2024 budget.
Consumer
Perception On Usage Of Subsidy Savings
As indicated by the Head of State, the increase in fuel prices is intended to reduce the State’s subsidy burden on petroleum products and possibly diverting the funds to other avenues to improve the living standards of Cameroonians. However, many a Cameroonian has minimum knowledge of exactly what project was realised with their extra contribution to state cash inflow via the increased fuel prices. A bike driver or taxi driver would feel fulfilled to learn that his extra FCFA 110 paid for Super was part of the funds used to build a hospital in Founangue in the Far North Region or a school in Noni, in the North West Region, or a bridge in Bamvele, in the East Region.
Multiplier
Effect Of Increase In Fuel Prices
Rumours
and the effective increase in the prices of fuel were received with anguish by
many stakeholders as it immediately led to increased travel and transport cost,
increased consumer spending and business cost and increased inflation.
Businesses
rely on vehicles that use fuel for the transportation and logistics of their
products. Therefore, when fuel expenses for businesses increase, product and
service costs may also rise. These increases can be passed on to consumers as
higher prices for final products and services.
Fuel
prices determine the daily travel and transportation costs for vehicle owners,
thus their increase directly leads to increased expenses and strained budgets.
Considering transport cost is a significant portion in every budget, its
increase will have a toll on general consumer spending restricting other
expenditures, which could deteriorate the living standards of the population.
Considering
fuel is important to most economic operators, an increase in its price will
lead to a general price increase of other products leading to an inflationary
situation, thus elevating the consumer price index and reducing purchasing
power.
With
business expenses on a high resulting from increased fuel or transport cost,
businesses directly and hugely affected would source for ways to cut down on
other costs and often resort to reducing staff and limiting wage increases,
thereby increasing the unemployment rate and prolonged wage stagnation.
Incommensurate
Accompanying Measures
The
Secretary General of the Prime Minister’s office, in his correspondence of
February 2, 2024, notifying the increase in fuel prices equally highlighted
some measures to be put in place by the State to cushion the effects of the
increase in fuel prices.
Among
these measures includes an increase by 5 percent of the basic salaries of
public servants, dialoguing with the private sector on the guaranteed
inter-professional minimum wage and related issues, and the reduction of
certain tax and customs charges in the road transport sector. While these
measures lack more data for effective planning and forecasting, questions
whether they will attain the intended objective remains a concern.
Possible
Ways To Limit Effects Of Fuel Price Increase
Increased
fuel and transport cost can push people towards alternative modes opting for
more economical energy sources for power generation and use of public
transportation, cycling, walking and ride sharing services. Our environment has
its inherent limitations to some of these alternatives, some of which are
uncoordinated, coupled with less luxurious public transport services,
insecurity on the streets, absence or non-respect of walk paths.
While
the increase in fuel prices will enable the State to save on subsidies on
petroleum products, thereby boosting its treasury resources, the effect on the
end user only turns an already bad economic situation to a worse one, with
enormous hardship impending leaving the population to only but hope that C.S
Lewis’ “Hardships often prepare ordinary people for an extraordinary
destiny” quote sees the light of day.