A Cost–Benefit Analyses of Investment in Electricity Supply in Sub-Saharan Africa

Abstract

The real benefit of electricity consumption (EC) to the economies of Sub-Saharan African (SSA) countries is not well understood. Since most studies ignore the cost component, consequently, the push for increased investment in electricity supply has received little serious attention. This study, therefore, presents a method for conducting a cost–benefit analysis (CBA) argue for or against making significant investments in electricity supply. The benefit of electricity supply to an economy is determined through an autoregressive distributed lag (ARDL) model, whereas the cost is determined through a look-back generation expansion planning (GEP) model. This leads to the computation of a benefit-cost ratio (BCR) that can serve as a justification for or against increasing investment in electricity supply. The proposed CBA method, when applied to countries in Sub-Saharan Africa over the period from 2000 to 2019 reveals a BCR ranging from a low of 7 for Ghana to a high of over 108 for Chad. Intuitively, a dollar spent Increasing electricity supply is worth around 7 dollars to the economy of Ghana and over 108 dollars to that of Chad. The CBA result indicates the immense economic benefit yet to be tapped by SSA countries through investments aimed at increasing electricitysupply.