A Ghanaian Professor of Economics at the Southern Connecticut State University in the United States of America (USA), Professor Samuel Kojo Andoh, has advised the government to invest the potential revenue from the oil find to diversify the economy to enable it to maximise the contributions from other sectors.
According to him, the excitement over the find was likely to tempt the government and Ghanaians alike to be over-dependent on the expected revenues from the oil just like cocoa, to the neglect of other vibrant sectors of the economy, a phenomenon which is termed the “Dutch Disease”.
Professor Andoh, who is also the Finance Chairperson of the university, gave the advice in an exclusive interview with the Daily Graphic in Atlanta, Georgia.
He said in developing the economy, it was necessary to explore all sectors and the natural resource the country is endowed with and not only what was perceived to be the most lucrative ones.
The Economics Professor said the important legacies the present generation could leave for the next generation was to diversify the sources of energy so that the country is not dependent on just oil or hydro but on renewable, sustainable and dependable energy sources.
That, he stated, would ensure that the long-term development was not interrupted by the vagaries of the weather, oil politics and the ups and downs which characterised some of the country's sources of revenue — gold, cocoa and timber in particular.
Professor Andoh, who had been a visiting lecturer at the Ghana Institute of Management and Public Administration (GIMPA), was answering some questions on how Ghana could maximise the benefits from the oil find without leaving the other sectors to wallow in abject neglect.
Since the discovery of oil by Komos Energy, an American oil exploration company, and others in Ghanaian waters about eight months ago, experts in many areas have shared their advice on how the country could make the find a blessing and not a curse.
Professor Andoh said having oil was good but it could easily distort an economy and create long-term problems.
“As the oil sector expands and starts employing more people, economic activity in the other sectors of the economy could decline,” he warned.
Professor Andoh further observed that the other sectors could decline because the oil sector tends to pay higher salaries, thus more attractive to the workforce.
He explained that “one can easily see cocoa farmers and fishermen moving from farming into the oil sector; the nascent manufacturing sector could suffer as well, as resources get diverted to the oil sector.”
The professor of economics warned that “if this happens, we would have substituted one dependency for another.”
Indeed, he said “it is not unusual for the discovery and exploitation of such an important natural resource (a bonanza) to actually cause an economy to do worse,” referring to the “Dutch Disease.”
As a result, Professor Andoh said, “it is important for us not to lull ourselves into a false sense of security by thinking that we will always have oil and that the revenues from it are the solution to our problems.
“A good strategy will be to observe what Botswana has done with its diamonds and what Nigeria has done with its oil.
Smart wealthy people smooth their earnings over their lifetime [in reference to Botswana] and do not increase their expenditure when there is a spike in their income — the case of neighbouring Nigeria.
“As Ghana exploits oil for export and local use, it should always have an eye on what will happen when the oil runs out,” he warned and added that “it is also important to bear in mind that with the high oil prices, come the real possibility of alternatives being developed which could cause the price of oil to decline in the long run and cause havoc with oil revenue-dependent economies.”
Professor Andoh, however, noted that it was heartening to observe that the government was aware of the potential problems and was reviewing models across the world from which to adopt a good one.
— Story by Charles Benoni Okine,