Electricity Tariff Hike to Deepen Economic Woes – Energy Expert Warns
The Executive Director of the Centre for Environmental Management and Sustainable Energy, Benjamin Nsiah, has cautioned that the recently announced electricity tariff increase by the Public Utilities Regulatory Commission (PURC) could have dire consequences for Ghana’s economy, particularly the industrial sector.
On Tuesday, April 16, the PURC announced a 14.75% upward adjustment in electricity tariffs, set to take effect on May 3, 2025. The Commission attributed the increment to key cost drivers including the depreciation of the cedi, high inflation, rising fuel prices—especially natural gas—and the current power generation mix.
But reacting to the development, Mr Nsiah described the adjustment as economically burdensome, warning that it could trigger a ripple effect of rising costs, business contractions, and job losses.
“In my view, inflation is already captured within the depreciation of the currency, so factoring it again into end-user tariffs results in double costing—and that double costing will hurt our economy significantly,” he told NorvanReports.
Cost Spiral and Inflation Concerns
Mr Nsiah explained that higher electricity tariffs translate into increased production costs for businesses. This, he noted, contributes to a rise in the Producer Price Index (PPI), which eventually pushes up the Consumer Price Index (CPI), accelerating inflation.
“When electricity tariffs go up, the cost of production rises. This drives the PPI up, which then affects the CPI. When the CPI increases, inflation rises, and the Bank of Ghana responds by tightening monetary policy. That cycle ends up choking businesses,” he noted.
He further indicated that such a chain reaction often compels the Central Bank to raise the policy rate to contain inflation—a measure that makes credit more expensive for businesses already grappling with tight margins and high operational costs.
Threat to Industry and Jobs
Mr Nsiah warned that local industries are already under strain and could face severe consequences if tariff hikes are not managed prudently.
“Increasing the policy rate makes borrowing costly for industries. This cycle of tariff adjustments traps the economy in a loop of rising costs and shrinking productivity,” he said.
He called on policymakers to adopt a more strategic and long-term approach to tariff reviews, one that ensures affordability and competitiveness for businesses.
“If we keep pushing tariffs upward without a long-term strategy, our industries will suffer, and many may resort to staff cuts or layoffs. This could ultimately increase unemployment and slow economic growth,” he added.
The warning from Mr Nsiah comes amid growing concerns from the private sector and industry players over the impact of rising utility costs on business sustainability and national competitiveness.
