Ghana’s Oil Boom – Will it Fuel Conflict?
February 21, 2011 | 12:24pm
In a grim aside in the 2007 movie Blood Diamond, a villager in war-torn Sierra Leone remarks that “It’s a good thing we don’t have oil”. Ghana, as is often said, is a stable country in a “rough neighborhood”. Over the last two decades, West African countries such as Liberia, Sierra Leone, Cote d’Ivoire, Nigeria and Equatorial Guinea have been rocked by conflicts, civil wars and coups. In many cases, there is a natural resource dimension to the conflicts. Diamonds, diamond smuggling and illegal logging in Sierra Leone and Liberia. Oil in Nigeria’s Niger Delta. Cocoa revenues in Cote d’Ivoire.
In June 2007, Ghana announced that it had discovered a major new oil find – the “Jubilee” field – and would soon start producing oil in commercial quantities. Ghana’s then-President, John Kufuor, said that the country’s new “black gold” would enable Ghana to become an “African tiger”. “Oil is money, and we need money to do the schools, the roads, the hospitals. If you find oil, you manage it well, can you complain about that? Even without oil, we are doing so well already. Now, with oil as a shot in the arm, we’re going to fly.” Some, Ghanaians, though, were apprehensive – would Ghana’s discovery lead to large scale problems with conflict and corruption experienced by Nigeria, their neighbor to the east?
Fast forward to the end of 2010. After much debate over the appropriate safeguards and legal frameworks in parliament and society at large, Ghana started producing oil in December without completing new laws to regulate the sector and manage and allocate the more than $1 billion per year expected from oil revenues in the coming years. While President John Atta Mills said “I want to assure the people of Ghana the oil revenue will be used for their benefit” in his “State of the Nation” address to Ghana’s parliament last week, the oil revenue management law is still not in place.
In 2009 an Oxfam America report, Ghana’s Big Test: Oil’s Challenge to Democratic Development, had warned that “the needed institutions, regulations, and transparency measures should be in place early on to avoid the corrosive effects of oil booms seen elsewhere in Africa.”
The debates in Ghana over new laws to regulate the sector and manage the money highlight the risks that Ghana faces. Competition over oil resources could exacerbate existing regional tensions. Already, traditional chiefs from the Western Region, nearest to the offshore Jubilee field, have demanded Parliament earmark 10 percent of oil revenues for development of the region. Parliament has not agreed to this earmark but the issue is still in play as the oil revenue management law is still being debated in Parliament. Many are concerned that if Parliament agrees to an earmark, regions and communities producing gold, timber and cocoa will demand special earmarks, fracturing the “national cake” and creating a recipe for conflict.
Some members of fishing communities in the Western Region – living in poor conditions and facing declining stocks – see oil development as a new threat to their livelihoods. There have also been unconfirmed reports in the Ghanaian media, and suggestions by Nigeria’s ambassador to Ghana, that militants from the Movement for the Emancipation of the Niger Delta (MEND) in Nigeria are planning to target the Ghanaian oil industry – reports MEND has denied.
With presidential and parliamentary elections coming next year, Ghana’s political parties must find ways to manage expectations and to depoliticize the important national debates in order to find peaceful ways to manage Ghana’s oil “blessing”. If the “oil curse” can’t be beaten in Ghana, many fear that there will be little hope for Sierra Leone – which, unfortunately for the fictional villager, has now discovered oil.
Comment #1
Although the "oil curse" may be looming at the doorsteps of Ghana, the country has features that distinguish it's context from the typical resource stricken state. One context of note is the relatively diversified economy of Ghana. BBC indicated the new oil production will represent an estimated 6% of the economy whereas oil represents 92% in Nigeria and almost 100% in Angola. The lack of oil revenue dependence will undoubtedly increase the likelihood of prudent management and stability in Ghana. I would be interested in a discussion that highlights additional differences between Ghana and other "resource cursed" nations.
Comment #2
Absorbing blog post - thanks. This is a pretty engrossing blog post. Thanks over again - I will come back.
Comment #3
Much appreciation for this blog post. Truly riveting and accurately written post. I hope to discover even more in the near future.
Comment #4
Oil brings a lot of dough and with it conflict as more different interests are developed among other nations and within the country on itself. Problems not only about corruption will also arise but also on environmental break up especially if measures are not met on safety and disposal and how the revenue will be spent on, if it trul goes back to the people. These are just a few of it but if this is all carried out positively, there is no way that Ghana will be enriched more as new natural resource is opened up and new opportunies is gained as commented through
Comment #5
Certainly finding oil anywhere creates a nice industry, but unless those reserves are particularly large, then Ghana won't be out of the woods yet.
The cost of manufacturing the pumps and refineries as well as the workers who will operate them (and training) could put a big damper on the help this will bring unless there are substantial reserves.
I actually just did a little bit of reading on it, and apparently it's under the sea somewhere. This will make it more expensive to drill, but regardless, on a continent that's terribly poor, a commodity like oil will go a long way to develop Ghana.
Some other African countries have oil, but the only one that I know of is Sudan, and I'm sure that people would be much happier to deal with Ghana than the genocide promoters in Khartoum.
In a nutshell, it's going to take a lot of money and energy to make this oil worth something, but with depleting reserves worldwide like Cantarrell in Mexico, when Ghana is ready to sell, this will help them a lot.
Regards,
Martha G. Wilson