Ghana and Oil: Has Any Lesson Been Learned From Nigeria?

First published in December 2010

Image credit: Pixabay

Today Ghana has qualified as an oil-producing nation.  In my last post on the same subject, I stated the need for Ghana to take the development of local engineering skills content seriously if they are to avoid the mistakes which Nigeria made.  However, fears are being expressed that the whole process may have been rushed without adequate planning and preparation for the future. The oil and gas sector is huge and if well planned and managed revenue that will accrue over time has the potential of elevating Ghana to the same level as China, India, and Brazil. 

To achieve that level of economic ascendancy the government must urgently and diligently address the following points: 

• make the development of local oil and gas sector skills a priority, 
• they must not abandon their traditional agricultural and mining sectors as was the case with Nigeria, 
• they must ensure that the technology to collect and deliver natural gas as a by-product of oil drilling operation is in place or not very far off,
• they must put together a fair and inclusive revenue allocation formula for the benefit of everyone,
• they must put in place a comprehensive environmental protection plan to prevent oil spillage as well as a strategy for clean up operations in case of unavoidable oil spillage incidents,
• oil drilling, prospecting and refining companies must be made to invest adequately in communities where they operate.

Oil companies must be required by law to invest in the communities they operate by building roads, schools, hospitals, apprenticeship, and skills training to enable local youths to get into jobs in the oil and gas sector, and also encourage and promote entrepreneurship. Oil companies must not be allowed to dole out cash to local chiefs and hustlers or political thugs as they do in Nigeria.    

Need to plan for the future 

There are concerns that Ghana is rushing into a sector they are ill-prepared to reap maximum benefit from. They do not have the local content to manage the sector and if the Nigerian experience is anything to use as a benchmark a delay in drilling operations for another year or so to get the basics right would have been a wise bet in the long term. 

The oil belongs to the people of Ghana and the people of Ghana must reap the benefits alone, not just in terms of revenue from crude oil sale but from the jobs and investments that are associated with the oil and gas sector. For the people of Ghana to fully benefit from their new discovery, the government must not sit back and allow foreign engineers and technicians to hold sway in the industry with Ghanaians playing the second fiddle. 

Since drilling has commenced the government must now embark on an aggressive training program to develop indigenous engineers and technicians as a matter of priority alongside full drilling operations. The goal of such a program should be to produce a pool of skilled local professionals which will enable the country to keep key technical and logistic positions in the hands of its citizens and not foreigners in the near future. 

Over a short period of time, indigenous business people and investors must be savvy enough to be in control of contracting and investment opportunities in the sector thereby creating more jobs and business opportunities for local people as well as preventing capital flight abroad. This will earn more tax revenue for the government.

Is Ghana in a hurry to start milking their newfound cash cow?

There are signs that the government has no clear strategic plan in terms of fully exploiting the potential benefits oil drilling may bring to the country. For example, there are concerns that the government is yet to confirm its stake in the whole scheme of things which means that Ghanaians do not know how much oil revenue is projected to be earned. 

Signs of ethnic agitation for revenue sharing with the government and the oil-producing areas are beginning to surface. Also, there is yet any clear plan as to how they will collect and utilise natural gas rather than flaring or how the environment and oil-producing communities will be protected from oil spillages and pollution. What has Ghana learned from the Nigerian experience?

 Will all the eggs be in one basket?

Ghana is currently the world’s second-largest cocoa producer in the world just as Nigeria was one of the leading producers of cocoa, palm oil, and groundnut before oil was discovered. The country has made impressive democratic and developmental gains recently but can they keep the oil curse at bay by not neglecting other industries?

One fears that the rush to drill the black gold may shift attention away from the agriculture and solid mineral mining sectors which are the main revenue source until now. Will the government be able to continue to keep these industries attractive and competitive over time? With oil as the new addition to the country’s revenue model, the Ghanaian economy is already balanced and diversified only if the focus will not shift in favour of the emerging oil and gas sector. 

To avoid the oil curse the economy must remain diversified in order for the country’s eggs to be kept in more than a couple of baskets. It will be a shame should Ghana fall into the same cycle of neglect of non-oil sectors, corruption, disregard for the environment, a surrender of the oil sector to foreign company control and neglect of oil-producing communities.

Well-meaning Ghanaians must start asking questions for the benefit of future generations