What oil can do to less developed countries: Beware Ghana

It was a historic moment that Ghana on June, 2007 discovered oil in commercial quantities offshore Gulf of Guinea in the Western Region based on the effort of Kosmos Energy, a company based in the United States of America. With regards to its importance, it is no doubt, that oil stands as the linchpin for the economy of many countries including Saudi Arabia, Iran, United Arab Emirates, Equatorial Guinea, Angola, to mention but few. According to Brian Smith in his article “Angola becomes Africa’s largest oil producer” on September 4, 2008, the oil sector produces more than half of Angola’s GDP and 95 per cent of its exports.

It became clear the potential of Ghana to produce oil when on Monday, 12 January, 2009, Tullow Oil Limited, an independent oil and gas exploration and production group said it had made new discoveries around the Jubilee Field with estimates of about 17,000 barrels per day. Mr. Dai Jones, General Manager, Tullow Oil Ghana said tests have indicated “that future production well deliverability will be in excess” of 20,000 barrels of oil a day.

According to Mr. Jim Musselman, CEO of Kosmos Energy, 120,000 barrels of oil a day would be extracted beginning from the first quarter of the year 2010 which could increase to 250,000 barrels of oil a day within the following two years (Ghana News Agency, June 9, 2008). Oil has the potential to accelerate the growth of a country’s economy of which Equatorial Guinea is no exception.

Equatorial Guinea has been one of the smaller countries in Africa that has gained a lot from oil. Its economy once negligible has grown at an incredible 40% annually since the oil boom began. It has per capita income of more than US$30,000 which was as of 2006 the fourth highest in the world. It is no wonder the country now ranks 115th position of the United Nations Human Development Index (HDI) with value of 0.717 (in the medium category) signifying useful benefits of the revenue from the oil (effective development) to developing the people in terms of education, health, income, employment, to mention but few.

However, it is worthy to note that, the negative phase of oil exploration and production has been in international headlines and is termed as “The Oil Curse” which I deem it right to expose it to Ghanaians for due considerations to curb the similar fate in Ghana. The motive of this article is to bring to bear clandestine issues on the ground concerning the exploration and production of oil and to raise the visibility of how oil can be a necessary evil.

In Equatorial Guinea, reports indicate that the oil has made the regime of President Teodoro Obiang Nguema Mbasogo increasingly paranoid. The discovery of oil in the country increased his powers that several opposition leaders were jailed in 2002 after a mass trial to which many defendants turned up with broken arms and legs. Mr. Obiang scoffs at western notion of transparency insisting that how much he earns from oil is nobody else’s business. A brave opposition politician who competed with him in the 15 December 2002, Celestino Bonifacio Bacale said “Oil has turned him crazy”. In furtherance of this argument, a US Senate report in 2004 found that Riggs Bank helped top officials of Equatorial Guinea steal hundreds of millions of dollars in oil revenues. The issue of corruption by top officials in government is so much so that it has raised the concerns of many international agencies and institutions like the World Bank and countries including the United States. It is recorded that Equatorial Guinea government leaders siphon oil revenues to account set up for them in Washington. The country has been cited by the US State Department for human rights abuses, corruption and diversion of oil revenues to government officials. According to the CIA- The World Factbook, a number of aid programs sponsored by the World Bank and the IMF have been cut off since 1993, because of corruption and mismanagement with the comments that despite the country's economic windfall from oil production resulting in a massive increase in government revenue in recent years, there have been few improvements in the population's living standards.

Another country in question is Angola. According to Brian Smith in his article on 4th September 2008, “Angola becomes Africa’s largest oil producer”, Angola overtook Nigeria as Africa’s largest in Africa and the world’s eighth largest oil producer- a combination of Angola’s surge in growth and Nigeria’s decline in production following rebel attacks on its oil fields. Angola is now producing over 1.9 million barrels per day (bpd) of high quality crude oil from onshore and offshore fields up from 900,000 bpd in 2002 and from 500,000 bpd in 1993. Despite the above potentials, Ghana, an agrarian economy is improved and developed than Angola according to the United Nations Human Development Index. The United Nations Human Development Index (UN HDI) is a process of widening options for persons, giving them greater opportunities for education, health care, income, employment and others. It is a measure of human development. Based on the fact that, oil has generated US$1.71 billion in tax revenue in 2004 and now makes up 80% of the governments budget, a 5% increase from 2003 and 45% of GDP (OECD, International Energy Agency, Angola towards an energy strategy, 2006. Page 19), Angola was supposed to surpass Ghana in the UN HDI as oil in the international market is stable and continue to increase with agriculture products of Ghana very unstable and commanding lower prices. Angola‘s HDI is 0.484 in the 158th position which is in the low category (last category signifying poor state of the economy) with Ghana in the 142nd position of HDI 0.533 being in the medium category (according to the United Nations Development Program’s Human Development Statistical Update released on December 18, 2008, compiled on the basis of data from 2006 covering 180 UN member countries). This means that less effort is done by the Angolan government concerning the education, health care, income and employment of the people towards achieving the Millennium Development Goals in 2015. It can therefore be said that the oil revenue has made no significant improvements to the economy of Angola.

Also, the United Nations has criticized the Angolan government for using torture, rape, summary executions, arbitrary detention and disappearances, actions which Angolan government has justified on the need to maintain oil output (Omeje, Kenneth C. High Stakes and Stakeholders: Oil Conflict and Security in Nigeria, 2006.Page 157). Angola now faces the threat of disruption to its onshore oil production from the rebel group Front for the Liberation of the Enclave of Cabinda, like the Movement for the Emancipation of the Niger Delta (MEND), a rebel group in Nigeria. This is the curse of oil in Angola which the government and the people did not expect. The security atmosphere of the country is therefore bound to change for the worse which could be detriment to the Angolan economy. The cases of kidnapping and armed robbery which is rampant in the Niger Delta of Nigeria is likely to occur in Angola though the front for the Liberation of the Enclave of Cabinda is not well organized like the MEND in Nigeria.

Oil has been the root and catalyst of corruption to most oil producing countries. What then should Ghana expect in years ahead? Is the situation possible in Ghana? Let’s hope for prudent policies from the government to nip the situation in the bud and save mother Ghana from unforeseen disasters.

Ghana should not concentrate only on the benefits to be attained but the evil aspect of oil exploration and production should be given the necessary and due consideration.

Stephen Yeboah ([email protected]), Department of Planning

Kwame Nkrumah University of Science and Technology, Kumasi