We do not hope to be part of the statistic when poor nations are mentioned tomorrow in economic discourses in the wake of the nation’s discovery of oil. One of the things that can make this aspiration a reality is the management and use of Ghana’s recently discovered oil proceeds in the most equitable, efficient and transparent manner.
Ghana’s projected production levels of 120,000 barrels per day (bpd) is estimated to accrue over $6 billion in annual revenues at current prices, enough to secure Ghanaians the long-awaited economic freedom. It is thus an unquestionable fact today that, oil will play a very significant role in the economic development of Ghana and Africa for a considerable time to come. This is much so as more oil discoveries are made in other African countries such as Nigeria, South Africa, Ghana, Sudan, Angola and Libya.
An interesting point for business discourse is that the discovery of oil in many parts of Africa today is not only highly imperative to the African economy but to the US, Russian, Chinese and other European’s as well. This importance is expected to swell with the recent oil price hikes. It is known that the United States currently receives more than 15 percent of its oil imports from Sub Saharan Africa, about 10% of which is accounted for by Nigeria. This figure is projected to increase to about 25 percent in the next decade.
Interest in the oil business in Africa from the US and Europe will significantly increase in the next 5 to 10 ten years. This is because Africa has proved oil reserves of about 75.4 billion barrels with an estimated population of about 805 million people. However, it is uncertain whether the focus will continue to be on oil and gas instead of other alternative sources of energy.
Energy experts in Kenya in early June 2008 revealed that Solar power from Africa's deserts could supply all 600 million citizens currently without electricity and even export power to Europe. This could provide another significant alternative energy source.
Ghana
Investor interest in Ghana’s oil is already high. So far over 41 applications have been received by the Ghana National Petroleum Corporation (GNPC) from experts and oil and gas companies from the US, Europe and Asia to operate in the country. Africa and Ghana’s oil is known to be very attractive due to several reasons. It’s been described as “light and sweet” crude with low sulphur content which makes it easier and cheaper to refine into gasoline and other products. Most of it is located offshore which means decreased transportation costs. Transportation costs to the US East Coast in particular are lower from Africa than from the Middle East because the distance is shorter for supertankers. These explain some of the reasons why oil discovery in Africa is attracting so much interest from Europe and indicate the lucrative nature of the oil business. Given the deal outlined by the GNPC with the energy companies, it is clear that the nation stands to benefit a lot from oil proceeds.
Benefiting the Poor
However, records show that even though the huge amount of revenues from oil has often made the ruling class in Africa wealthy, it has done so little for the vast majority of the African people. Proceeds from Nigeria’s current oil production levels of 1.88 million barrels per day will be enough to turn around the fortunes of over 50% of the population. In oil rich nations such as Nigeria, Angola, Gabon, Equatorial Guinea and the Republic of Congo, more than 50% of the people live on less than $2 a day. This creates a strong feeling of deprivation and resentment among the majority poor which often results into conflicts.
Nigeria
There are more than enough examples from Nigeria for Ghana. A Nigerian anti-corruption watchdog commission approximates that over 45% of the country’s oil is wasted or stolen often by sophisticated criminal gangs who tap into the pipeline using hacksaws to cut through pipes to ‘claim their share’ of their nation’s resource. They ultimately divert thousands of barrels of oil away in tankers. According to OPEC reports in April 2008, Angola, a new entrant to OPEC, overtook Nigeria in oil production in April, 2008 with production level at 1.92 million barrels per day (bpd) whiles Nigeria produced 1.88 million barrels per day (bpd) for the same period. Angola thus is the current leading oil producer in Africa. This takeover by Angola is due to militant activities preventing Nigeria from reaching its production capacity. This must not be allowed to happen to Ghana.
As more oil is discovered in Africa, many stakeholders and advocacy groups are showing and are expected to show more interest in the way governments manage revenues accruing from oil. A lot more people and the international community will be interested in seeing how Ghana in particular will escape the ‘oil curse’ in managing the resource. It is however important that we all join forces to mount pressure on the governments to use the oil wealth to improve education, health, environment and infrastructure. We also need to whip up public resentment against corrupt tendencies in the management of our oil proceeds and to block all inclinations that are likely to ignite conflicts and insecurity for operators in the wake of the discovery and production.
Whichever political party in Ghana wins the December general elections, its government is expected to face strict scrutiny on oil spending. Such a government would have the arduous task of implementing mechanisms that will ensure proper allocation and management of the oil proceeds. Transparency and equity in the oil management will thus be key in escaping the ‘oil curse’.
Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.
