Typically, Ghana has not been known as a producer of crude oil. Instead, the commodities that come to mind as Ghana’s exports are mainly gold and cocoa. Since 2007 that the country discovered oil in fairly adequate commercial quantities, it has made inroads into the export of oil as a means of earning foreign exchange. While it hasn’t deviated from its main products Ghana’s crude oil story has seen it earn in excess of $6.5 billion from its oil exports between 2011 and 2020. Whether the amount is reflective of commensurate returns is another matter in itself, and is the topic of the first episode of Business Edge for this new week. Lekan Onabanjo converses with Dr Josh Bamfo, Partner & Head of Pricing and Economic and Advisory, Andersen Nigeria- who joins in from Lagos.
“Over time, it became necessary for Ghana to diversify,” says Dr Bamfo of Ghana’s entry into the oil and gas industry. The commodity was already there and by 2004, the country began licensing foreign and domestic firms to explore and produce oil. 2007 brought with it the discovery of crude oil in commercial quantities and by 2010, the impact of the exploration of oil as a commercial commodity started to be felt on Ghana’s economy. “The GDP growth rate in 2011 under the Attah Mills government shot up to 14% for that year. As expected, nobody imagined that that would be sustained” he added.
That growth rate flattered to deceive as it has since gone down and continued to be a cause for concern for Ghana’s leadership. The economic issues may not have been compounded by the country’s crude oil story, but it has become a critical component of the Ghanaian economy and the receipts raise certain questions. Has it been squandered? Has Ghana also been struck by the so-called “oil curse”? Is it correct to posit that nearly seventy per cent of the revenue accrued from oil has gone to debt servicing? Dr Bamfo doesn’t entirely believe so. “If you look at the amount – 6.5 billion US dollars; it’s significant but it could have been better. The hope is that the country is able to generate one billion dollars each year… Ghana should have been more prudent with the oil windfall. The government started overspending when it believed that producing oil in commercial quantities was Ghana’s new reality.”
The full conversation on Business Edge is above.