Prof John Asafu-Adjaye
Prof John Asafu-Adjaye, a senior fellow at the Institute of Economic Affairs (IEA), says even though Ghana’s oil production in commercial quantities has generated additional revenue for government to spend on development projects, its developmental impact so far is questionable.
According to him, “Some of the revenue has been saved for future generations. Oil has increased exports and improved the trade balance. However, oil has added very little to economic growth, and by extension, employment and poverty alleviation.”
Making a presentation yesterday in Accra on the theme: “A decade after oil discovery in Ghana: The economic impacts and policy implications,’ he said Ghanaians were not getting the best out of the oil production in commercial quantities, adding that there were minimal impacts on output and job creation due to weak linkages between the oil sector and the rest of the economy.
Giving a highlight on the role the country’s petroleum sector played, he said in 2015, petroleum contributed GH¢2.076 billion, representing 6.4 percent to real GDP.
“In comparison, the contribution of other sectors were mining GH¢2.77 billion, representing 8.5 percent; manufacturing (GH¢2.39 billion), representing 7.4 percent; agriculture, including forestry and fisheries (GH¢7.54 billion), representing 23.3 percent; and Services (GH¢17,553 billion, representing 54.1 percent.
He revealed that in spite of the local content provisions, many individuals and SMEs were unable to participate in the industry due to lack of skills and capacity.
“Furthermore, Ghana has not benefited from previous oil contracts in terms of the economic rent extracted,” the economist stated.
Prof Asafu-Adjaye commented: “As a matter of urgency, government should make the necessary investments required to facilitate onshore processing of oil and gas. This will enhance the developmental impacts of petroleum in terms of job creation and backward and forward linkages with other sectors.”
He further urged government to invest in human capital in this area to promote significant local participation.
He said: “There is a strong case for re-negotiating all oil contracts. Much can be learned from Norway which began oil production in 1969/70 and has done very well in terms of the management of its resources.”
Noting that the discovery of oil in commercial quantities in June 2007 made Ghana Africa’s newest oil producer in 2011, he said “despite the steady progress in the oil sector, its future prospects and impact on the Ghanaian economy are mixed. In this context, the degree of domestication of the industry in Ghana remains a debatable point. Even though the Ghana National Petroleum Corporation (GNPC) aspires to maximise local participation, the oil industry is likely to remain dominated by foreign players for some time to come.”
By Samuel Boadi