15th October, 2015
A Ghanaian government delegation is holding emergency talks in Nigeria to avert a drastic gas supply cut threat, a government spokesman said, thus avoiding a potential political crisis.
The Nigerian National Petroleum Corporation said it will cut gas supply by 70 per cent to Ghana’s main power generation company by Friday due to unpaid debts of $181 million. Ghana already suffers power shortages and Nigerian gas meets about 25 percent of its needs.
“They are already in Nigeria. They left Ghana last night. We are praying that they are able to negotiate … so that it doesn’t come to a cut in supply,” a spokesman for the power ministry told Joy FM radio on Thursday.
Power cuts have raised the cost of doing business and angered voters at a sensitive time for President John Mahama’s government ahead of what is expected to be a tough re-election battle next year.
Mahama has vowed to end the power cuts by the start of next year and the minister for power has said he would resign if the problem has not been fixed by then.
The government’s room for manoeuvre is limited, however, under the terms of an aid programme with the International Monetary Fund it is following to restore balance to its economy.
Ghana was for years one of Africa’s economic stars but falling global commodity prices have blunted the value of its gold, cocoa and oil exports.
Its fiscal problems include inflation of up to 17.4 percent in September, a currency that has fallen sharply in the last two years and a debt-to-GDP ratio of around 70 percent with what economists say are high debt service costs.
The Nigerian threat is a sign of budgetary stress and the strain of energy sector reform in Ghana, experts said.
“It is extremely embarrassing for the government. It touches on credibility … Every investor will be looking at that and saying, ‘Is this a country to do business in?'” Ben Boakye of the Africa Centre for Energy Policy think tank told Reuters.
Nigerian gas flows to Ghana through the West African Gas Pipeline Company’s pipe that runs via Benin and Togo. VRA buys the gas to fire power plants mainly in the east of the country.
Hydro supplies around 50 percent of Ghana’s power with the rest from its own gas and other sources.
The power crisis stems from a fall in supply from Ghana’s dams, government underpayment to the Electricity Company of Ghana, residents’ illegal consumption and tariffs too low for VRA to recoup its costs.