(FG) Govt defers plan to slash gas supply to Ghana

A ship berths near the Nigeria Liquified Natural Gas company (NLNG) near Finima village, during an aerial tour by the Royal Dutch Shell company, in Bonny March 22, 2013. REUTERS/Akintunde Akinleye (Reuters)

Nigeria has deferred a plan to slash gas exports to Ghana beginning Friday over an outstanding debt of $181 million, alleviating a threat that could have worsened electricity blackouts and caused another headache for the government.

The West African Gas Pipeline Company (WAGPCo) said it was "cautiously optimistic" that Nigeria's N-Gaz consortium would accept a payment plan by Ghana's power generation company, the Volta River Authority (VRA), after talks in Accra next week.

Ghana gets around 25 percent of its power through gas from Nigeria that flows through the pipeline via Benin and Togo and the threat by N-Gaz to reduce volumes by 70 percent would have raised the cost of supply.

The issue is sensitive for President John Mahama's government ahead of elections next year that are expected to be closely fought. The ruling party already faces an economy that has slowed sharply and power cuts that have angered voters.

Mahama has vowed to end the blackouts by the start of next year and his minister for power, Kwabena Donkor, has said he will resign if the problem has not been fixed by then.

"By next week we are expecting a way forward ... There appears to be a will by all the parties to resolve the issue without the flow of gas being cut off," Harriet Wereko-Brobby, spokeswoman for the pipeline company, told Reuters.

Donkor led a government delegation to Abuja for emergency talks on Thursday and Friday, and Wereko-Brobby said her company had been told the government paid N-Gaz $10 million. VRA owes the company $103 million of the outstanding total.

The power generation company's problems are a sign of the budgetary stress facing Ghana, a country that is following an International Monetary Fund programme to restore fiscal balance.

Ghana's exports of gold, cocoa and oil helped make it one of Africa's star economies but a decline in commodity prices has hit it hard. VRA stopped paying its bills in August 2014. Prior to that it had been borrowing money from Ghanaian banks at high interest rates to fund the payments, an energy expert said.

The power crisis stems from a fall in supply from Ghana's dams, government underpayment to the Electricity Company of Ghana, residents' illegal consumption and tariffs too low for VRA to recoup its costs, experts said.

In the long term, Ghana aims to solve the problem by greatly increasing its domestic gas production. The president of the World Bank said on Friday the government was on the right track.

"We are very supportive of President Mahama's current reform strategy. We think he's now making the hard decisions ... to get Ghana back on the path of growth," World Bank Group presidentJim Yong Kim told Reuters.