CMR needs proactive economic policies - Prof. Ernest Molua

Professor Ernest Molua, Economist at the University of Buea has amidst the global decline in fuel prices said that what we are seeing in Cameroon is a government that pays no attention to market trends.

He regrets that government seems to ignore what is going on in the global market place regarding the price of fuel. The professor of economics is demanding that Cameroon implement proactive economic policies.

Prof. Ernest Molua thank you for accepting to talk to us. Oil prices have fallen sharply over the past seven months leading to significant revenue shortfalls in many energy exporting countries. What in your opinion accounts for such a nosedive in oil prices?

Now we have the lowest oil prices for a period of time. It is because of the oversupply in the world market by major oil producers such as Saudi Arabia and Kuwait. Some months back, the oil prices were rising sharply. But with oil prices rising sharply, it was hurting the global economy and also particularly the American and the European Union economies.

The Americans through their foreign policy and their economic needs forced their partners in the Middle East such as Saudi Arabia and Kuwait to pump so much oil into the world market. And with an increase in oil being pumped into the global market, prices have fallen. This is because too much supply is available for very little demand. This has led to a decline in global oil prices. This is in line with American economic and foreign policy because to run the machinery of their industrialisation, they need cheaper inputs like oil.

The first consequence in the global economy is that industries of the developed nations that rely on petroleum products will have the potential to buy at a very low rate, thereby experiencing a low cost of production. This increases their industrial capacity, increases their profit level and increase the number of people employed by the industrial sector.

All of these combine to lead to an increase in economic growth and industrial development for those countries. It is therefore a win-loss situation in the sense that the rich countries that rely heavily on such raw commodities to drive their economy have the ability now to have low cost inputs. Meanwhile, countries that supply such raw materials need the revenue from such raw material to drive their economies. But given that they are now selling the raw materials at a lower cost, they are experiencing a loss and also a loss in their economic development.

How does Cameroon fit in the picture?

For Cameroon, it is a very interesting situation because Cameroon is both a big consumer of imported crude petroleum and also a big exporter of petroleum products. This is so because what Cameroon produces is the heavy crude that cannot be refined in Cameroon. What we use to run our machineries and cars is the light crude that we import.

Therefore if the price of the light crude is declining, it may be a positive situation for Cameroon. It means that the importation of such light fuel will witness a price drop. On the other hand, if the price of the heavy crude is declining and Cameroon exports such, then we should expect a drop in our revenue.

How can Cameroon manage such a crisis?

We need active economic and industrial policies. Policies should not be in such a way that you do it for five years and you go to sleep. It should be on a day to day basis. It has to be proactive. The policy makers and planners should follow the developments in the marketplace. We have to come up with measures to protect the consumers and ensure that they reap the benefits of a fall in oil prices. We are not yet reaping the benefits because there has been no change in the price of a litre of petrol in Cameroon, despite the decline in oil prices.

We need an active economic policy for government to adjust very rapidly for a decline in the average price of exported oil. We might have forecast an increase in oil prices in the budget so as to realise our development projects, but that has not been the case. That is therefore why we need to have an active and proactive economy.

Is the global economy heading towards an implosion?

No. We are not there yet. Remember that the declining oil prices are an advantage to the economy. When the cost of production is low, profits increase.

Is there a possibility for the prices of fuel in Cameroon to reduce within this year?

It will be very difficult for prices of fuel to be reduced because there are a lot of projects going on in the country and the government has to raise revenue for those projects. Reducing fuel prices will mean a setback to our development agenda. What we are seeing in Cameroon is a government that pretends not to pay attention to the market figures. The government seems to ignore what is going on in the global market place regarding the price of a litre of fuel.

There are those who suggest that for developing countries, including Cameroon to emerge, they have to scrap off oil subsidies completely. Is this position shared by you?

Our colleagues at the World Bank will support such measures. But if you take away subsidies, the consumers will be greatly affected. Cameroon has put in place subsidies so that an average Cameroonian does not incur a high cost of purchase for products like fuel and basic commodities. If subsidies are scrapped, the burden will be transferred to the final consumers. An increase in fuel prices can lead to a crisis. We see the government still maintaining the subsidies for a long time to come.

Are you in the class of those who believe that it is time for our refinery to refine the fuel we consume in Cameroon?

Works are ongoing in SONARA (the National Oil Refinery Company) to upgrade the refinery. It is our expectation that it will be able to refine the kind of crude that comes from Cameroon.