Is Ghana’s Electricity Spending Paying Off?

By Albert Ayirebi-Acquah – FCCA, FMVA

Introduction

Over the past decade, Ghana has poured billions of cedis into keeping the power sector running. From bailing out utilities to paying independent power producers (IPPs) for unused capacity, the government has averaged 1.7% of GDP annually to cover electricity shortfalls.
But with electricity contributing just 1.5–1.8% of GDP, the question is simple: Is the economic return worth the fiscal outlay?

Why This Matters

Electricity powers industry, supports services, and drives productivity.But the fiscal burden of sustaining Ghana’s electricity sector has become unsustainable. We must ask: are we spending smartly—or just plugging leaks?

Key Insights

• Electricity contributes less than 2% of GDP but has an outsized ripple effect.
• The 2012–2015 power crisis (dumsor) cost Ghana an estimated 5.6% of GDP.
• The government spends GH¢30–40 billion over a decade (1.7% of GDP yearly) to stabilize the sector.
• Blackouts have largely ended, but tariffs remain high, and the sector still needs bailouts.

How Ghana Compares to Peers

Ghana spends more to keep power flowing but gets less return per cedi spent than its peers.

Fiscal Efficiency of Electricity (FEE)

This metric shows how much GDP return a country gets per 1% of GDP spent on electricity. Ghana spends more to keep power flowing but gets less return per cedi spent than its peers.

What Needs to Change

Ghana’s electricity spending helped avoid collapse—but it must now deliver productivity.

Recommendations:

• Make tariffs cost-reflective, while protecting the vulnerable.
• Renegotiate IPP contracts to avoid paying for unused capacity.
• Channel fiscal space into grid reliability, access, and industrial power use.
• Use FEE and GDP/kWh to track whether electricity is driving real growth.
• And most urgently, tackle ECG’s ~28% distribution losses—the single largest driver of sector cash shortfalls—by bringing in private sector participation in procurement, billing, and revenue collection.

Let’s not just keep the lights on. Let’s make them work for growth.