Gas

Nigeria Engages Ghana Over $75 Million Gas Debt

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Nigeria and Ghana, on May 11, held talks to resolve a pending $75 million gas debt.
Nigeria’s Minister of State for Petroleum Resources, Ekpo Ekperipe, discussed the outstanding $75 million gas debt with Ghana’s President, John Dramani Mahama.

The minister stressed the need to engage appropriate agencies in Ghana to settle the debt owed to Nigeria for gas supplied under the West African Gas Pipeline (WAGP) agreement.

This financial strain could disrupt gas supplies through the West African Gas Pipeline.

Ghana’s Gas Deal with Nigeria

Nigeria supplies gas to Ghana through the West African Gas Pipeline (WAGP). WAGP is a 678KM gas pipeline that transport natural gas from Nigeria’s Niger Delta to Benin, Togo, and Ghana.

The West African Gas Pipeline Company Limited (WAPCo), a consortium that includes Chevron, NNPC, Shell, and national gas companies from Ghana, Togo, and Benin, operates the pipeline.

Gas is predominantly used by power plants in Ghana to generate electricity for homes and businesses.

Over the years, Ghana has periodically owed for gas supplied by Nigeria through WAGP. In return, Nigeria demands payment from Ghana to avoid potential supply disruptions.

The ongoing dispute over a $75 million gas debt is part of Ghana and Nigeria’s ongoing supply and payment relationship.

Read: Ekpo Elected WAGP Ministers’ Committee Chairman

Background of the Debt

The $75 million gas debt owed by Ghana to Nigeria arises from accumulated arrears by Ghana’s Volta River Authority (VRA) for gas supplied by N-Gas Limited. This Nigerian company delivers gas through the WAGP to Ghana.

In February, N-Gas officially notified the Volta River Authority of possibly suspending gas supply due to gas, raising concerns over potential power shortages in Ghana.

As a result, Ghana is negotiating a payment schedule with the N-Gas to avoid possible disruptions.

Should Nigeria lower gas exports, Ghana’s thermal power plants, like Asogli and Kpone stations, would face potential shutdowns. This could trigger widespread power outages that would harm the Ghanaian economy.

Ghana’s $75 million gas debt originated from irregular payments by the VRA. The company faces numerous financial challenges, such as:

  • Subsidised electricity tariffs limit VRA’s ability to generate adequate revenues.
  • Delayed payments from the Electricity Company of Ghana (ECG), the national power distributor.
  • Exchange rate fluctuations that impact the Ghanaian Cedi. The fluctuations tend to make the Dollar payment for gas supplied more expensive.

Past Gas Disputes Between Nigeria and Ghana

This is not the first time gas relations between Nigeria and Ghana have faced tensions.

In 2015, Ghana owed over $180 million to Nigerian gas suppliers. Nigeria’s N-Gas had threatened to reduce its gas supplies to Ghana’s Volta River Authority by 70% due to unpaid gas debts.

By 2016, Nigeria halted the flow of gas to Ghana over the $180million debt owed to the West African Gas Pipeline Company (WAPCO).

By Early 2021, Ghana owed N-Gas about $42 million in gas debt. Ghana eventually settled the $42 million debt by February of the same year.

Before the payment, Nigeria reduced its gas supply to Ghana’s thermal power production by 50% (60 million cubic feet of gas per day) due to its $40.3 million debt.

The COVID-19 pandemic had also placed enormous pressure on national budgets, which worsened payment delays.

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