By Albert Neenyi Ayirebi-Acquah, FCCA, Energy Analyst
Introduction
An Overview of the Cedi’s Performance Since January 2, 2025
In recent weeks, the Ghanaian cedi has not only stabilized but begun to appreciate against the US dollar -a welcome trend not seen in a long time by market participants, analysts, and the public. The response has largely been positive, though questions remain about the durability of the trend, particularly given that some of the underlying drivers – such as external inflows – are beyond Ghana’s direct control.
That said, the broader macroeconomic outlook has improved, with growing consensus that this momentum can be sustained if economic managers remain disciplined. Key contributing factors include the prompt servicing of domestic debt (especially post-Domestic Debt Exchange Program (DDEP) bonds), strong reserve buffers, and a renewed focus on fiscal prudence.
While the appreciation has brought welcome relief across many sectors, it’s worth noting some quiet discontent among exporters, who are beginning to feel the squeeze of a stronger local currency on their margins.
Why the Exchange Rate Matters for the Energy Sector
This article focuses specifically on Ghana’s power sector, where the exchange rate plays an outsized role for several reasons:
- The sector relies heavily on capital-intensive investments, most of which are denominated in US dollars.
- These investments are structured to be recouped over medium- to long-term horizons.
- Project financing is predominantly sourced externally, with implications for foreign exchange exposure and profit repatriation.
- Critically, electricity tariffs are set in Ghana cedis, while a large share of sector expenses—such as fuel, equipment, and power purchase agreements (PPAs)—are USD-denominated.
Given this structure, it becomes clear that the GHS/USD exchange rate is a more critical variable for the power sector than even the domestic interest rate. Over time, persistent depreciation of the cedi – without adequate tariff adjustments to reflect forex losses – has contributed significantly to the build-up of energy sector arrears and debt.
This has become a growing fiscal risk for the entire economy. At the recent IMF/World Bank Spring Meetings, Ghana’s Finance Minister underscored this risk, noting that the energy sector debt is currently the single biggest economic threat facing the country.
It is against this backdrop that the cedi’s recent appreciation must be examined—not simply as a currency movement, but as a potential window of opportunity to restore balance in the sector.
Positive Impacts of the Cedi’s Appreciation
- Lower Cost of Power Purchased by ECG
A stronger cedi means ECG’s purchasing power has increased in relation to its dollar-denominated Power Purchase Agreement (PPA) invoices. For example, an average invoice of US$8 million in April 2025 for a single Independent Power Producer (IPP) was equivalent to GHS 113.2 million. By the end of May, if the current exchange rate holds or improves, the same invoice would amount to approximately GHS 103 million – yielding a monthly saving of around GHS 10 million per IPP invoice. Extrapolated across the sector, this could translate into cumulative savings of GHS 450– 560 million between May and December 2025.
2. Higher USD Value of ECG’s GHS Collections
Since ECG collects revenues in cedis, a stronger exchange rate translates into more dollars. ECG’s ~GHS 1.4 billion in April collections equated to about US$99 million. With the same GHS figure in May, the dollar equivalent rises to approximately US$109 million – an effective forex boost of US$10 million in May and ~US$80 – $100 million if current rates are sustained to the end of this year.
3. Reduced Pressure on PURC to Increase Tariffs
With a weighted average GHS/USD rate of 15.6974 during PURC’s Q2 tariff-setting window, the current appreciation of the cedi currently at a spot rate of 12.89 at the time of writing this article significantly reduces the pressure to increase tariffs in the next quarterly review, while creating room to recover forex losses still sitting on ECG’s books.
4. Greater Fiscal Space for Government
Government obligations to settle dollar-denominated energy sector arrears become more affordable in cedi terms, freeing up fiscal resources for other priorities.
5. Reduced Translation Losses for State-Owned Enterprises (SOEs)
A stronger cedi reduces the impact of forex losses on the financial statements of SOEs like ECG, VRA, and GNPC—improving their bottom lines and audit profiles.
6. Improved Disposable Income for Consumers
Lower prices on imported goods and services—which account for an estimated 30–50%2 of Ghana’s CPI—improve consumers’ disposable income, making it easier for households to pay electricity bills on time and sustain consistent usage.
Cautionary Notes
- Risk of Complacency
There is a danger that power sector and economic managers may become complacent, delaying critical structural reforms – particularly the urgent need to reduce energy sector arrears within the 2025 fiscal framework.
2. Premature Tariff Reductions
The temptation to lower tariffs in response to temporary exchange rate gains could undermine long term sector recovery. Windfall savings should be prioritized for paying down accumulated debts and systemic losses.
3. Failure to Lock in Gains
Without proactive steps – such as refinancing debt, accelerating payments – the sector risks
squandering this window of opportunity created by the cedi’s appreciation.
4. Sustain the Underlying Drivers
It is critical to maintain and reinforce the policy actions currently supporting the cedi’s strength— such as timely debt service, prudent fiscal management, and Gold inflows—to ensure continued currency stability and sustained relief for the energy sector
Strategic Policy Considerations
- Priorities Prompt Payment of Liabilities
The foremost priority should be the timely settlement of energy sector obligations. This would help reduce the shortfall that must be financed through the budget and potentially lower the sector’s debt stock within the year.
2. Frontload Capital Expenditures where Liquidity Permits
Taking advantage of the favorable exchange rate, government and SOEs should frontload essential capital purchases or forex-based payments to lock in savings and ease future cost pressures.
Conclusion
In a welcome turn of events, one of the major drivers of Ghana’s energy sector instability—persistent currency depreciation—has not only stabilized but reversed course. This has provided much-needed relief to economic managers, sector players, and electricity consumers alike.
If this trend continues, it could offer a rare opportunity to reset the sector, improve its financial position, and reduce the burden of energy-related debt.
President John Mahama’s commitment to tackling energy sector arrears is timely. The cedi’s appreciation is a rare tailwind. If harnessed wisely, it could help Ghana turn the page on its energy sector debt crisis.
Equally important, as Ghana pursues a 24-hour economy, the viability of this initiative will depend heavily on a reliable and financially stable energy sector.
Continuous production and expanded business hours require predictable and affordable electricity.
Without sustained reforms to stabilise the sector, the 24-hour economy risks being undermined by the very power constraints it seeks to overcome.
Source: https://energynewsafrica.com
He cited Authentix, a US-based company providing fuel authentication solutions to the NPA, as a key example of successful business collaboration.
The fuel authentication program plays a crucial role in maintaining petroleum product integrity, preventing dilution and adulteration, and ensuring accurate tax revenue recovery.
Ambassador Virginia Palmer reaffirmed the US Embassy’s commitment to assisting Ghana in attracting American investments, strengthening the energy sector, and deepening bilateral cooperation.
The visit marked an important step toward enhancing strategic partnerships and reinforcing Ghana’s role in the global petroleum industry.
Source: https://energynewsafrica.com 
“This project is yet another shining example of effective collaboration between my government and our development partners,” the President noted. “While my administration funded the construction of the distribution network, our partners financed the installation of the solar PV generation plant and battery storage.” He extended heartfelt appreciation to all those who made the project possible, singling out the World Bank and UNOPS for their significant contributions.
He also acknowledged the support of other partners, such as the African Development Bank and the Japan International Cooperation Agency (JICA), while expressing hope for continued collaboration in future energy initiatives.
The President revealed that the Moyamba Solar Plant serves as a pilot initiative that will be replicated in other district headquarter towns, aiming to ensure that many districts and chiefdom headquarters gain access to reliable electricity.
“Access to energy is a human right and a critical enabler of human development, especially in the 21st century,” he said. Highlighting the transformative power of electricity, President Bio added, “Reliable electricity can catalyze business growth, foster entrepreneurship, enhance education and healthcare services, and improve the overall quality of life. For too long, this has been lacking in our rural communities.”
He emphasized that the project will enable farmers to process and preserve their produce, allow traders to operate for longer hours, and improve the performance of students and healthcare workers. “If we can achieve this in Moyamba, we can certainly replicate it across the country,” he asserted.
He noted that the absence of reliable power had hindered service delivery, business development, and quality of life. Reaffirming his government’s commitment to energy access, President Bio urged the residents of Moyamba to use the electricity productively, to build businesses, create jobs, and uplift their communities.
UNOPS West Africa Director, Silvia Gallo, commended President Bio for his unwavering commitment to sustainable and reliable electricity in Sierra Leone. “The commissioning of the Moyamba Solar Plant is a clear testament that change is happening, and UNOPS is proud to support your vision of energy access for all citizens,” she said.
Kagaba Paul Mukibi, Senior Energy Specialist at the World Bank, lauded the project as a major milestone in the country’s electricity access agenda. He confirmed that the World Bank is committed to supporting both off-grid and stand-alone solar systems, particularly in schools and healthcare facilities nationwide.
Dr. Kandeh Kolleh Yumkella, Chairman of the Presidential Initiative on Climate Change, Renewable Energy, and Food Security, also applauded the achievement. He stressed that President Bio’s energy agenda seeks to address all major barriers in the sector and reminded the public that “there is no quick fix to energy challenges anywhere in the world.”
He described the Moyamba project as a pilot phase of the broader initiative to electrify seven towns by replacing diesel power with clean solar energy.
Source: https://energynewsafrica.com