Ghana’s “pleasant” energy challenge
Ghana has difficulty with energy. Ghana is grappling with the consequences and costs of managing excess power supply rather than shortages. The situation of more power than the country currently needs is causing serious concern in both the Executive and Parliament.
Ghana moved from inadequate power supply in 2014-2015 to excess power in 2019. Five short years was all that it took our neighbour and competitor in West Africa to solve its problem of power supply. Today it has an installed capacity of 5,083 MW, almost double the peak demand of 2,700 MW.
To tackle the power challenge the previous government signed contracts with three power generation firms and with gas suppliers. The deals relied on take-orpay agreements, meaning they obliged the government to pay whether customers consumed the power gener
ated or not. Further, payment was in foreign currency. The firms went to work. Now that they are generating excess energy, the government estimates it would cost the country extra US$500M annually to pay for power alone.
It faces a similar challenge with the gas supply. According to the Minister of Finance of Ghana, Ken Ofori-atta, from next year a gas glut could cost the country of between US$550 and US$850 million every year
The Ghanaians have proposed renegotiation of the contracts from take- or- pay to take-and-pay. The government would only pay for such power as citizens consume. They would also be looking at the foreign currency component of the payment terms.
Nigerians would consider the energy challenge in Ghana a pleasant one given our benighted history of power supply. In 20 years, despite fanciful promises, Nigerians still grapple with power failures and blackouts arising from inadequate generation and poor distribution. When it was in opposition, the now ruling APC government made extravagant promises about how it had the magic bullet to solve the power problem. It turned out to be mere bluster.
By solving its power challenge in just five years, Ghana has shown that a focused government can achieve. The Akufo-addo government has shown great resolve in tackling Ghana’s challenges. It has changed the narrative of the country, following a dip, to one of sustained positives. The International Monetary Fund, in its 2019, report showcased Ghana as a case study.
Ghana has repaid a $918 million economic stabilisation loan it took from the IMF in 2015. It deployed the loan strictly according to the terms and for the stated purpose.
The IMF notes: “By 2015, Ghana’s economy was in trouble, hobbled by widening current account and budget deficits, rampant inflation, and a depreciating currency. Credit dried up as interest rates rose and banks’ bad loans piled up. At the root of Ghana’s woes was out- of- control government spending. In early 2015, Ghana turned to the IMF for a $918 million loan to help stabilise the economy”.
“Ghana’s economy is on the mend. The trade and budget deficits are narrowing. The pace of economic growth is poised to rise to 8.8 per cent in 2019 from 2.2 per cent in 2015. The inflation rate is projected to fall to 8 per cent from almost 19 per cent. Cuts to wasteful spending made room for much needed social services, such as free secondary education. For Ghana’s 28 million people, it all adds up to higher incomes, better job opportunities, and more purchasing power.”
The success story with power is proof that Ghana has turned the corner, and its trajectory is upward and positive. There are lessons for the federal and state governments in Nigeria. Give Nigerians power now.