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Ghana and her oil discovery: blessing or curse? Printable Version PRINTABLE VERSION
by AARON NII LAMTE LAWSON, Ghana Jun 7, 2010
Globalization , Environment   Opinions
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Ghana and her oil discovery: blessing or curse? Photo credit: "Oiled Bird - Black Sea Oil Spill 11/12/07," by Igor Golubenkov.

A country endowed with natural resources can be considered blessed. When these natural resources are effectively utilised they can uplift the quality of life of the people of that nation. Ghana is one country blessed with resources such as gold, timber, cocoa, bauxite and, in recent development, oil. While the benefits of these resources are established in truth, their misuse can have a negative impact.

There are at least two African countries whose oil finds are generally considered a curse rather than a blessing. They are Nigeria and Angola. We Ghanaians can draw lessons from them as we prepare ourselves as a nation for our oil exploration. Nigeria pumped its first barrel of oil in the 1950s and has since set world records in corruption. The government’s own anti-corruption watchdog, the Economic and Financial Crimes Commission estimates that between independence in 1960 and 1999, the country's rulers stole $400 billion in oil revenues; equal to all the foreign aid to post colonial Africa during the same period. The Niger Delta area, which supplies the bulk of Nigeria‟s crude oil is bedeviled by serious political and economic instability as a result of neglect.

In Angola the story is just as sad. Despite the huge revenue generated from oil, 70% of Angolans live below the poverty line. Cholera and Malaria prevalence rates are high and the child mortality rate is among the worst in the world. In some cases unemployment can actually worsen. Fueled by the new spending power of the few, the cost of living also goes up. If the government doesn't share the wealth, the higher prices mean real rises in poverty and in Angola there's little evidence to suggest the government is sharing the proceeds accrued from the oil.

“Dutch Disease” and the resources curse
What does this concept mean and how is it related to resource curse? According to Wikipedia encyclopedia, “the Dutch Disease is a concept that purportedly explains the apparent relationship between the increase in the exploitation of the natural resources and a decline in the manufacturing sector”. The theory is that, the increase in revenues from the natural resource will affect the industry and a nation’s economy by raising exchange rates, and thereby making the manufacturing sector less competitive and public services entangled with business interest. Natural resource exploitation, if not well managed can result in large foreign currency inflows, including large direct foreign investment, foreign aid and the increase in the prices of natural resources. The long-term effect of this is that manufacturing jobs move away to lower cost countries.

The term “Dutch Disease” was coined in 1977 by The Economist to describe the decline in the manufacturing sector in the Netherlands after the discovery of a large natural gas field deposited in the North Sea in 1959. According to Investopedia, the new found wealth caused the Dutch guilder to rise, making exports of all non-oil product less competitive in the world market. The Dutch Disease brought about the world’s biggest private-public partnership between Esso (now ExxonMobil), Shell and the Dutch government in 1963. (Source: http://www.sandiegoaccountantsguide.com/library/Dutch-disease.php ). What lessons we can derive from this and what measures can we put in place to ensure that the oil find will be a blessing and not a curse?

Ghana must first of all strengthen its regulatory bodies or agencies to ensure that our environment is not destroyed as is happening in the Gulf Coast of the United State where oil rigging had led to leakages and spilling by the giant British Oil Company British Petroleum (BP). The leak is destroying marine ecosystems and the livelihoods of US citizens along the Gulf Coast. The Ghana National Petroleum Corporation (GNPC), Environmental Protection Agency (EPA) and the Environmental Advisory Council must ensure that there is strict adherence to standards and regulation without compromise. If Ghana doesn’t put into place those measures, there will be an environmental cost similar to that in Nigeria, where more than 1.5 million tons of oil have been spilled over 50 years, making the Niger Delta one of the most polluted places on earth.

Government and other partners in the oil industry must also ensure that revenue generated from the oil is properly and used for the benefit of all Ghanaians (i.e. to provide basic needs such as food, water, schools, hospitals, shelter and, more importantly, create jobs for the people). Mishandling of the proceeds will increase poverty, crime and civil conflict. An example again is Nigeria: while a small elite became filthy rich, its ordinary citizens fight one another for the crumbs.

Thirdly, all stakeholders and government must formulate a policy that will ensure that Ghanaians are fully involved in the exploration for the oil and in the distribution of accrued proceeds and wealth. If this policy is fully implemented, it will create jobs and boast the economy, preventing civil unrest and conflict. The proposed Domestic Content and Participation Policy aimed at enhancing local participation in the oil and gas industry is a step in the right direction. (Source: Ghanaian Times, Wednesday, 19th May 2010).

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michelle digolo | Aug 5th, 2010
This article was really interesting enjoyed reading it and wish Ghana well... ..still in awe as to the depth of this piece..kudos!!!

Good Piece
Jason Jolaoso | Aug 23rd, 2010
Great article . It's a piece I will like to come back to over and over again. The Nigerian angle which can be termed factual and unfortunate however describes the true test of character and positive decision making that faces every human being that walks on the face of the planet. Passing this test is based on having a sound moral training and values as a child/youth and simply making the right decision when the time comes. Nigeria is poised for that change. The change that will make our resources a global point of reference and standrad.

Biodun Awosusi | Sep 3rd, 2010
Great piece...well researched!

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