Dr. Ousman Gajigo, Economist Formerly With ADB
By Dr. Ousman Gajigo
A few weeks ago, I wrote an article where I highlighted thesignificant financial mismanagement at NAWEC between 2017 and 2020. Since my article came out, an additional audited financial report for this state-owned enterprise (SOE) came out, which was for 2021. We are currently in 2025 and the most recent financial statement for our largest state-owned enterprise is 2021. Let that sink in.
It appears that the financial mismanagement at NAWEC has been getting worse according to the 2021 audited financial statement. Let’s begin with the revenues. The 2021 audited financial report indicated that revenues that year were understated by a staggering amount of D 545.8 million. In other words, this missing amount from NAWEC’s revenue cannot be accounted for. It is more than 10% of the NAWEC’s total revenue from that year.
In 2021, NAWEC had about 18 bank accounts. The essentialinformation that the auditor needed to be provided to make the necessary reconciliation was not provided. The total balance involved in those 18 bank accounts was D 361 million. We can only speculate what was being hidden to prevent auditors from having complete access to those critical bank records.
The accounts payables, which is the amount that NAWEC was supposed to owe to its vendors and suppliers, was also under-reported. If you recall, two senior NAWEC officers were reported being caught on audio asking a supplier to falsify their amount. In 2021, such activities can be estimated to have cost NAWEC about D 315 million. This is the value of the difference between what was reported in NAWEC general ledger versus the amount that was confirmed by the auditor.
Another D 500 million was estimated to have been lost due to mis-reporting of the foreign exchange rate used. In other words, wrong exchange rates were used in the settling of payments to foreign suppliers. The difference in actual exchange rates used versus what should have been the correct ones led to the loss of at least D 500 million.
Please note that all these financial improprieties occurred in a year when NAWEC’s official loss was D 1.3 billion. In the previous year (2022), NAWEC’s reported financial loss was about D 348 million. The missing amounts identified in the 2021audited financial statement in the accounts payable and accounts receivables were much higher than in the previous years. In other words, the degree of financial mismanagement at NAWEC has been increasing over time. We can only speculate how many billions of dalasi have been lost due to mismanagement between 2022 and 2024.
It is important to point out that despite these egregious financial irregularities, no special investigations were taken. As far as I can tell, no member of the institution’s management faced any consequences or were required to answer any questions on thesemassive financial irregularities.
It is important to realize that these losses at NAWEC affect the whole country. The total amount of debt taken by NAWEC or by the government on behalf of NAWEC has long exceeded D 10 billion. And each year, NAWEC is contributing to the nation’sdebt accumulation. As you may have seen, over D 1.4 billion was taken from the 2025 budget so that NAWEC can pay Karpowership. Given that the government ran a budget deficit this year, NAWEC financial performance has contributed to our accumulation of debt since these deficits are financed by government borrowing.
These losses, which reinforce NAWEC’s reputation as a chronically mismanaged institution, also ensure that the keyfundamental problems in our energy sector such as increasing our generation capacity through foreign investments cannot be addressed. In order to attract legitimate foreign investors as independent power producers in the country, the national utility company need to be in a sound financial footing. After all, these investors would need to enter into long-term power purchase agreements (PPAs) with NAWEC. But instead of such financially sustainable PPAs, we are stuck with ruinous contracts such as the existing PPA with Karpowership.
The average annual payments from NAWEC to Karpowership is $ 30 million. In the 2021 financial report, the amount NAWEC paid the company was over $ 33 million (using the exchange rate at the time). Unlike the electricity purchase from Senegalwhere we have been behind payments for months, NAWEC cannot afford to miss payments to Karpowership. Part of the reason is that NAWEC has taken a standby letter of credit from a local bank as guarantee against default. The other factor is that as an IPP on a floating ship, the company can lift anchor any moment and sail away and leave the country in darkness as they did to Sierra Leone when that country missed payments.
In an earlier article, I focused on this inappropriate PPA with Karpowership. The fundamental problem is not that there is something inherently wrong with buying energy from a foreign supplier. Far from it. Rather, the very nature of the contract with Karpowership is highly inappropriate given the inordinately long duration of rolling over expensive short-term contracts. Contracts with a company such as Karpowership should be extremely short-term in nature with a definite end date to address emergency power shortages. This is because Karpowership’s energy is extremely expensive and all the risk is born by the country. These facts alone are sufficient to tell us how inappropriate the contract is even without knowledge of the tariff structure in the Karpowership PPA.
To drive home how inappropriate the PPA is, it would be akin tosomeone needing a residential accommodation but is insteadchoosing to stay at a hotel where they are being billed on a weekly basis. And then, instead of moving out after a week or two, the individual keeps rolling over the hotel stay for months or years. What is going to happen is that over a period of a few years, the individual would find out that what they have spent in staying at the hotel would be enough to construct a house. No one needs to be told about the exact price of a daily hotel rates to be able to reasonably infer that such an arrangement is financially insane. Unfortunately, this is the nature of the existing PPA between NAWEC and Karpowership.
Another problem with NAWEC’s PPA with Karpowership is the fact that a lot of effort is being done to keep it secret. There is no reason why such a contract should be a secret. The nation deserves to know about the tariff structure and rate that is specified in the PPA given the inordinately high amount that is being paid when our public finances are strained. There is no justifiable reason to keep it secret despite repeated legitimate requests. After all, the tariff structure and details of the PPA with Senelec of Senegal is now public information.
As we discuss the dysfunctional state of NAWEC, we must remind ourselves where the ultimate responsibility lies. Some of the specific loss-making activities that occur on a day-to-day basis at NAWEC are done because of direct instructions from high up in the government. This includes the awarding of expensive and non-transparent contracts that are awarded to politically connected vendors.
But without those improper interferences into day-to-day activities, the government bears a more fundamental responsibility for NAWEC’s dysfunction. The management teamof NAWEC is appointed by the government, either directly from the Statehouse or through the Ministry. Its board of directors is also chosen by the government. Therefore, NAWEC’s state of affairs is the direct result of leadership failure in the current government, atop which sits President Adama Barrow.