Brent crude oil climbed above $71 per barrel on January 29, reversing declines that helped ease inflationary pressures just days after the Bank of Ghana expressed confidence that global conditions favored controlling inflation.
The Governor of the Bank of Ghana, Dr. Johnson Pandit Asiama, told the 128th Monetary Policy Committee press briefing on January 28 that global headline inflation had gradually shifted toward central bank targets. He cited sustained drops in oil prices, lower food prices, declining underlying inflation, and anchored inflation expectations as factors supporting the favorable outlook.
The MPC noted these developments had created room for possible monetary policy easing to stimulate growth, and subsequently reduced the policy rate by 250 basis points to 15.5 percent.
However, geopolitical tensions involving potential US military action against Iran heightened concerns over supply disruptions, driving the sharp price increase. President Donald Trump stated that a large US naval force in the region stands ready to act with speed and violence if necessary, raising worries about crude shipments from an area supplying roughly one third of global oil.
Potential Iranian retaliation could target shipping through the Strait of Hormuz, a critical passage for crude oil and liquefied natural gas cargoes. While Iran has expressed willingness to engage in dialogue, it has warned of an unprecedented response if provoked, even as diplomatic efforts continue.
The US dollar fell to its lowest level in nearly four years, making dollar denominated commodities more expensive for importers like Ghana.
Ghana’s vulnerability to rising oil prices stems from heavy reliance on imported crude. The country’s oil import bills climbed steeply throughout 2025, reflecting both global price pressures and dependence on foreign energy sources.
Ghana spent $1,267.7 million on oil imports in the first quarter of 2025, nearly doubling to $2,406.7 million in the second quarter. The trend accelerated sharply in the third quarter, rising to $3,714.9 million, before surging to $5,126.6 million in the fourth quarter. This fourfold increase over the year, particularly the 38 percent jump from the third to fourth quarter, underscores significant pressure on external accounts and foreign exchange reserves.
Rising crude costs have immediate domestic effects, increasing transportation and production expenses that flow through to food prices, goods, and services. The escalating import costs threaten to undermine gains highlighted by the MPC, potentially complicating BoG efforts to maintain price stability.
The central bank expects headline inflation to remain broadly within the medium term target range of 6 to 8 percent, but Dr. Asiama specifically warned about potential spillover risks from commodity market volatility. With stability largely achieved, the focus of policy is gradually shifting toward consolidating gains and supporting stronger real sector recovery, job creation, and improved financial intermediation.
The MPC judged that current monetary conditions remain tight relative to prevailing inflation dynamics. Sustaining Ghana’s macroeconomic gains will hinge on disciplined fiscal policy, strong policy coordination, and targeted agricultural interventions to contain food inflation, while remaining vigilant to heightened geopolitical tensions.
Ghana’s crude oil production has declined for five consecutive years, dropping from a peak of 71.44 million barrels in 2019 to 48.25 million barrels in 2024, necessitating increased imports to meet consumption demands.
The timing of the oil price surge creates a challenging backdrop for monetary policy decision making. Just as the BoG begins shifting focus from inflation control toward growth support, external shocks threaten to complicate that transition.
Dr. Asiama acknowledged at the MPC briefing that while growth recovery gained momentum in 2025, with real GDP expanding at an annual rate of 6.1 percent during the first three quarters, the favorable global dynamics may not be permanent.
Ghana’s gross international reserves reached $10.7 billion by August 2025, providing a substantial buffer against external shocks and supporting the country’s ability to finance essential imports including energy products. However, sustained high oil prices could erode this cushion while simultaneously putting upward pressure on domestic prices.
The energy import bill occurs against Ghana’s ongoing efforts to diversify its energy mix and reduce dependence on imported petroleum. Major energy companies have announced new investments in Ghana’s oil and gas sector, with significant funding allocated for drilling operations in the Jubilee and TEN fields.
Analysts note the situation highlights the vulnerability of import dependent economies to commodity price volatility, even during periods of domestic economic stability. Ghana’s inflation fell to 5.4 percent in December 2025, well below the central bank’s target range, creating room for the recent rate cut.
However, the rapid shift in global oil markets demonstrates how quickly external conditions can change. The MPC’s decision to proceed with monetary easing reflected confidence in sustained disinflation, but the committee’s statement specifically cautioned about commodity market volatility as a risk factor.
Transportation costs typically adjust quickly to fuel price changes in Ghana, with ripple effects spreading through the economy. Food prices, which had been declining and contributing to lower inflation, could face upward pressure as logistics costs rise.
The developments underscore the delicate balance facing policymakers as they navigate between supporting growth and maintaining price stability in an economy exposed to global commodity shocks.
