Global oil prices have slumped in recent times making developed and developing economies, most of them south of the Sahara feel the pinch in their once burgeoning economies. These declines have seen proceeds from oil drop sharply in the last 12 plus months. Between 2010 to mid-2014, a barrel of oil stood at $110 which was fairly stable during this period. Brent crude oil dropped below $50 a barrel for the first time since May 2009 in January 2015, and US crude was down to below $48 a barrel. The factors which accounted for these trends were chiefly in twofold – weak demand in many countries due to insipid economic growth, coupled with surging US production at the time. Additionally, the Organization of Petroleum Exporting Countries (OPEC)was adamant on weighing down on production to allow prices to soar up.U.S. traded crude oil is trading at $45.37, still below the $50.00 mark.
In his opening remarks at the Africa Oil Governance Summit 2016 convened by Africa Centre for Energy Policy (ACEP), the deputy minister of petroleum, Benjamin Dagadu,mentioned that low oil prices posed a lot of challenges for the local economy; paramount among them is the difficulty in attracting investors in deep and ultra-deep water environment for exploration. But Mohammed Amin Adam, Executive Director of ACEP believes African countries and Ghana in particular has suffered the heavy weight of declining proceeds from oil due to their less diversified economies, over-dependence on oil revenues, lower tax efforts, corruption, and fiscal mismanagement, among others.
“It simply illustrates the difficulties ahead of our countries, especially in Africa as a result of our failure to save booming resource revenues for today. Our effort will be further undermined by the growing size of illicit financial outflows from our continent, estimated to be more than US$50 billion annually, of which more than 70% flows from oil, gas and mineral economies.” Out of this US$50 billion annually, Africa is importing some US$35 billion in food supply according to former United Nations Secretary General Kofi Annan. Africa must seal this loophole to be able to produce enough to feed itself and also save some revenues from oil. Ghana should also put its house in order with appropriate legislations to regulate its rather infant oil and gas sector. With these drops in oil prices comes with it attendant revenue losses which will be felt in some sectors of the economy begging for revenue for development.
The Launch of the Sustainable Development Goals (SDGs) dubbed transforming our world has among its achievable targets; ending poverty, building resilient infrastructure, promoting inclusive and sustainable industrialization and foster innovation and ending hunger among others, has sent some shivers down the spine of economic policymakers across the continent that largely depend on the revenues from oil to balance their development planning efforts. But ACEP boss maintains that this should compel the continent to prepare for difficult times in its development.Achieving these set targets in the SDGs require robust financing and like Mr. Adam advised, Ghana must diverse its economy. Use revenues from the oil sector to open up other sectors in the local economy to bring about the development and growth which will see some targets in the SDGs being achieved.
How do we ensure adequate investments are made to mitigate the declining fortunes in the oil and gas sector for our economy? Already there has been earlier diagnosis of the infamous Dutch disease where there is a negative impact on the Ghanaian economy of anything that gives rise to a sharp inflow of foreign currency, such as the discovery of large oil reserves (in 2007). The currency inflows lead to currency appreciation, making the country’s other products less price competitive on the export market. Here agriculture has seen a decline (in some instances negative growth) from 7.4 percent in 2008 to 2.6 percent in 2012. We need to do more to shore up this sector for growth. Ghana Talks Business analysts believe the way forward is improved policies and support for agriculture in Ghana. Big scale and scientific agriculture offers a good diversifying opportunity for the Ghanaian economy.. Diversification here means a lean more towards everything agriculture from cultivation to finance, marketing, export, agribusiness, primary processingand effective agriculture extension services using the best technologies available. Analysts argue that agriculture holds key to Ghana’s economic transformation and every government current and in the future must put in place appropriate policies backed by implementation to achieve that. In so doing Ghana stands a chance to achieving part of the SDGs which focuses on eradicating poverty and hunger. There’s even a big catch, Ghana becoming a net exporter to the rest of the world and its neighbors in the West African bloc and the Sub-Region. Burkina Faso in the Sahel region is making a lot from vegetable exports to neighboring countries, Ghana is blessed with abundant water supply, and we need more irrigation for our farmers up north and in the middle belt to farm all year round. This, the CEO of Dalex believes is a prerequisite to get it right from the onset for growth in the agricultural sector which will have ripple effects in the general economy. Most hawkers on the major streets of the capital, Accra, mainly from the three northern regions who have sought economic refuge on the streets will be compelled to go back and engage in meaningful livelihood empowerment activities. It is somewhere in the oil revenue management act that a certain percentage of the revenue be dedicated to agriculture and its allied activities, this must be adhered to ensure its judicious use.
These moves amongst others could ensure a more diversified Ghanaian economy.
Author: Paa Swanzy-Essuman || firstname.lastname@example.org