The structure of our economy must change - Togbe Afede

Togbe Afede XIV, Agbogbomefia of Asogli State, has called on the government to reconsider the nation's economic structure in a bid to address rising economic challenges.

He said the nation remained stuck in high inflation, and interest rates despite various efforts, and that with the movement of capital controlled by foreigners, the growth of the local currency had been affected.

Togbe Afede made the call when the Board Members and Executives of the National Petroleum Authority (NPA) paid a courtesy call on him in Ho.

The Paramount Chief, who also is a known business magnate with investments traversing the finance, energy, and aviation sectors, said: “pragmatic steps” must be taken or the “problem becomes permanent.

“If you look at our economy, the bulk of it, unfortunately, the most important sectors, are owned by foreigners. That is a big challenge. Even the sector we are operating in- the oil and gas sector, the bulk of what we are supposed to be earning, goes going to foreigners.

“Our mining, banking, and telecoms sector are all dominated by foreigners.

“So, what it means is that the large movement of funds on account of all of this takes up everything that we earn. Because of trade, wipe out any trade surplus that we can realize and invariable then we suffer a deficit. And that does not help the value of our cedi.

“It means that the structure of our economy must change. Otherwise, then it continues like this. Of course, there are a few other countries that are at about our level, but they do not suffer as much of the inflation and the local currency depreciation that we suffer, and that means that we need to think a lot harder about how come that fallen cedi has become our lot.

“How come that high inflation has become our lot, permanently? We need a lot of hard thinking,” he stated.

Togbe Afede appealed to the Bank of Ghana (BoG) as the regulator, to address as he put it, the “high interest” financial environment, which he alleged, made profits for the banks at the expense of the private sector growth.

He said that “Ours has been a high-interest rate environment- a high inflation environment, and the question is why?

“We have always tried fighting inflation with a high-interest rate, and it does not work, and I am sorry it would not work. The interest rate itself is a price, and it must be. If you go and pay 30 percent to borrow, you will transfer all that cost to your consumer and then you get into a vicious cycle.

“And worse of all, when you try to increase interest rates based on inflation past price changes, then you are engaged in what I call a self-fulfilling prophecy- taking the past into the future.

“We need to as a nation look critically at how we fight the battles against inflation. Assuming interests are raised again today, your sector participants would also need to increase their prices because they need to transfer the extra cost of borrowing to the market, and that is where the challenge is. Our interest in this country is already extremely high,” he said.

Togbe Afede said the BoG should focus on securing and maintaining “low stable inflation” and said parity laws did not support the concept of increasing interest rates with rising inflation.

“These high-interest rates are not making it easy for us to change the structure of the economy to allow Ghanaians to own the economy, and to allow us to record surpluses on the other segments of the balance of payment accounts.

“So, we have a problem, but we are creating difficult hurdles for the resolution of those problems. How can high-interest rates help fight inflation when it produces big profits in the banking sector? This means the high-interest rates are not even shared with depositors, at least not sufficiently. So, we have a difficult problem; a deep structural problem, and the earlier we rethink our approach and our methods, I think the better.

“Bank of Ghana should focus more on stability. The Bank of Ghana should not boast about the profits that they have made. The Board of Bank of Ghana should not tap management at the back for making so much profit. That would mean a little bit of misunderstanding of the real purpose of Bank of Ghana- Price and exchange stability, as its contribution towards our search for growth as a macro-economic objective, and our search for increased employment-job creation, as a microeconomic objective.

“If we cannot pursue policies that would help us change the structure of our economy, create the jobs that we need to create, enhance local ownership of the economy, our problems will become permanent- they are almost becoming permanent,” the Agbogbomefia stated.

The team from the NPA, which was led by Dr. Mustapha Hamid, the CEO (Chief Executive Officer), had called on the Agbogbomefia to seek his wisdom, as the authority worked, to mitigate the current fuel crisis.

Togbe Afede commended the resolve to consult broadly and said all should consider the “huge task” of making quality available, affordable, and profitable, a shared one.

He also commended the Government’s quest to develop a petroleum hub and said it would help advance the petrochemical sector.

Togbe Afede said: “I am happy that the Government has taken on this idea of a petroleum hub because one other thing that we need to do is to increase local value addition to our products, if we can, for example, expand refinery capacity to import less refined products. It would mean that we could cut some of the cost.

“If we can realize the dreams; the objectives of the petroleum hub, that can also be helpful, Togbe Afede said, calling for the expansion of fuel pipeline networks to minimize transportation costs.

Dr. Hamid said the NPA was engaging stakeholders including the Tema Oil Refinery, in a series of meetings with the support of the Board.

He also hinted at a “high powered meeting” with the Finance and Energy Ministries, and assured that, “we are doing something about it”.