The Association of Ghana Industries (AGI) has warned that the recent electricity tariff increase could raise manufacturing production costs by up to 10%. This significant rise occurs despite an improving economic outlook for Ghana and falling global fuel prices. The AGI fears the adjustment will negatively impact businesses and consumers.
AGI’s Economic Affairs Committee Chairman, Eric Defoe, stated the actual cost impact on businesses could exceed the nominal 3% tariff increase. He explained that electricity is a foundational input for manufacturers. Higher electricity costs can trigger a ripple effect, causing additional cost increases across entire supply chains. This cumulative effect could push total production cost increases to between 5% and 10%.
This development comes as Ghana actively seeks to stabilise its economy and manage inflation. The Bank of Ghana has implemented measures to control price increases and support business growth. An increase in utility costs acts as a counter-current to these efforts. It could undermine the progress made in stabilizing key economic indicators like inflation, interest rates, and the exchange rate.
Eric Defoe explicitly questioned the timing of the tariff review. He highlighted that global petroleum prices, a key factor in electricity generation, are currently decreasing. This is due to the resolution of geopolitical tensions such as the US-Iran conflict. Defoe argued regulators should have waited to assess the impact of these lower fuel prices before implementing a tariff hike. He stated, “What worries us is that petroleum prices went up; therefore, there was some adjustment in the market, but they’re coming down now because the US-Iran war has ended, and prices are falling back.”
The hike’s implications extend beyond manufacturers, potentially affecting consumer prices as businesses pass on increased costs. Decision-makers and market observers will closely watch how businesses respond to the higher energy expenses. This could influence investment decisions and employment levels within the manufacturing sector. The AGI's concerns prompt questions about the effectiveness of quarterly tariff reviews and the consideration of broader economic indicators in utility pricing. Such reviews are meant to reflect current market conditions, not operate in isolation. The government also introduced fuel levies to support the power sector, further challenging the timing of this adjustment. The situation demands careful monitoring by economic stakeholders.