SOEs: Energy, Petroleum, and Finance

By Michael Kofi FOSU

In Ghana’s developmental journey, State-Owned Enterprises (SOEs) occupy the “commanding heights” of the economy. These entities — ranging from the Electricity Company of Ghana (ECG) to the Ghana National Petroleum Corporation (GNPC) — are not merely commercial units; they are the engines that provide the energy, fuels, and financial services that sustain national productivity.

However, beneath this strategic significance lies a fiscal time bomb. Historically, Ghana’s SOEs have been a primary source of fiscal risk, with their massive indebtedness often threatening to derail the country’s macroeconomic stability.

The Pillars of the Economy: Energy, Petroleum, and Finance

The dominance of SOEs is most visible in three critical sectors:

1. Energy (Power): Entities like the Volta River Authority (VRA) and ECG manage the entire value chain from generation to distribution. They are essential for industrialisation and urban life.
2. Petroleum: The GNPC and the Ghana National Gas Company (GNGC) manage the state’s interests in oil and gas fields, ensuring that natural resource wealth is converted into energy for power plants.
3. Finance: State-owned banks, such as GCB Bank and the Agricultural Development Bank (ADB), ensure credit availability to sectors that private commercial banks might find too risky, such as small-scale farming.

The ‘Circular Debt’ Trap: A Chronic Fiscal Risk

Despite their importance, the financial health of many SOEs is precarious. The greatest threat is the circular debt phenomenon, particularly in the energy sector.

In this cycle, the ECG (the distributor) fails to collect enough revenue from consumers to pay the VRA and Independent Power Producers (IPPs). These generators, in turn, cannot pay the GNPC or Ghana Gas for fuel supplied. This creates a massive hole in the national budget, as the central government is frequently forced to step in with bailouts to prevent a total collapse of the national grid.

According to the 2024 State Ownership Report, the SOE sector recorded a net loss of GH₵9.67 billion in 2024. Whilst operational revenues are growing, they are being absorbed by finance costs (interest payments) and operational inefficiencies.

Reforms and the 2025/2026 Reset

At the start of 2026, there is a renewed push to defuse this fiscal risk. Under the Energy Sector Reset, the government recently cleared approximately $1.47 billion in arrears to restore international credibility and replenish the World Bank’s Partial Risk Guarantee. Key strategies for a sustainable future include:

• The Cash Waterfall Mechanism: Ensuring collected revenues are automatically shared across the value chain.
• SIGA Oversight: The State Interests and Governance Authority (SIGA) is now enforcing stricter performance contracts for SOE managers to ensure profitability.
• Tariff Adjustments: Moving towards cost-reflective pricing so that utilities no longer rely on government subsidies to survive.

Conclusion

State-Owned Enterprises are the backbone of Ghana’s economic infrastructure, but their “too big to fail” status has historically allowed inefficiency to fester. For Ghana to achieve long-term debt sustainability, the focus must shift from merely managing SOE debt to ensuring these entities operate as lean, professional, and profit-making institutions. Without this transformation, the progress made in stabilising the national economy will always remain vulnerable to the next SOE liquidity crisis.

About the Author

Michael Kofi Fosu is the Chief Executive Officer of the International Trade Finance and Payment Consultancy (ITFP), a firm specialising in import and export trade finance, asset recovery, project financing and intermediation. A registered member of the International Trade and Forfaiting Association (ITFA) in Zurich, as well as the Financial Times and Global Trade Review in the UK, ITFP serves as Ghana’s gateway to global trade finance advisory. Mr Fosu also represents ITFP at ITFA.