- Ghana pays over $500m on subsidy annually.
- Electricity tariffs have not been adjusted in over two years.
- Take or pay contracts mean that the government pay for energy in excess of demand.
Mr Habibu Adam, a senior economist at the office of the Senior Presidential Advisor, has stated that the government pays about $4 billion in subsidies for the energy sector. Adams noted that the subsidy exists because Ghanaians aren’t paying the right tariffs. The economist noted that it was time the government restructured the electricity tariffs as subsidising the electricity sector is unsustainable. Mr Adam stated that there had been no tariff adjustment over the past two years. “You realise that for the last two years, there hasn’t been any adjustment and what we are currently paying now is even lower than what we were paying in 2015, but somebody has to pay for that, and the government is paying a lot,” Adams said.
The Economists illustrated how the reduced tariff has led to a shortfall in Ghana’s electricity market. “For instance, if you look at August, the invoice was about GHC900 million and the money collected by ECG (Energy Company of Ghana) after taking out all other statutory deduction what was left was GHC540 million. So the money that was required to pay all those in the value chain was about GHC900 million, so about GHC300 million was outstanding, and that is just monthly, so it means we don’t pay the right tariff,” he indicated.
Adams noted that the high energy costs were due to the capacity added during the country’s energy crisis. Adams stated that the country signed take or pay contracts in excess of 5GW while peak demand is 2.7GW. “So close to 2,300 megawatts are energy that we don’t need but because of the take or pay contract we have to pay for it so at the end of the year it cost us over 500 million dollars and all are on the head of ECG, so the government has to come in to pay.”