A Review of the Nigerian Energy Industry

$181m gas debts: Ghana sends delegation to prevent cut in gas supply from Nigeria

*Presidents Muhammadu Buhari of Nigeria and John Mahama  of Ghana.
*Presidents Muhammadu Buhari of Nigeria and John Mahama of Ghana.

Oscarline Onwuemenyi

16 October 2015, Sweetcrude, Abuja – A Ghanaian government delegation is holding emergency talks with Nigerian officials to avert a drastic gas supply cut threat, thus avoiding a potential political crisis.

The Nigerian National Petroleum Corporation (NNPC) recently said it will cut gas supply by 70 percent 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 noted yesterday.

According to a former Chief Executive Officer of the Volta River Authority Dr. Charles Wireku-Brobbey, Nigeria’s decision to cut gas supply to Ghana’s Aboadze thermal plant was occasioned by the failure of the government to settle its indebtedness to the Nigerian gas authorities and this might worsen power supply in Ghana.

Wireku-Brobbey told a Ghanaian news medium that contrary to expectation, the constant power supply in the country is not dependent on the incoming power barges from Turkey.

He said, “The problem for us not the arrival or non-arrival of the power barges. As we speak the government owes Nigeria over GHC100 million, which we are yet to settle, and that is the problem that should concern us.”

Currently, Ghana receives in excess of 140 million standard cubic feet per day of gas from Nigeria. The supply, although not enough, has greatly enhanced power supply in the country over the last few weeks.

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.

Ghana had in November 2014, accused Nigeria of breaching the agreement to supply gas to it, a situation that has worsened the country’s power supply.

Mr. Edward Bawa, Communications Consultant at Ghana’s Energy Ministry had told a Ghanaian news medium that since the inception of the West African Gas Pipeline Project, Nigeria, which is responsible for supplying Ghana, Togo and Benin with natural gas, has proven to be unreliable.

“Since gas started flowing through the West African Gas Pipeline, Nigeria has demonstrated that they cannot be relied upon to give us gas,” he maintained.

According to him, Nigeria was supposed to send 123 million cubic feet of gas to Ghana but was only able to supply around 49 cubic feet, saying the quantity is “woefully inadequate to enable us to power our generating plants.”

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