Oxfam: Ghana's New Oil Law Leaves Room for Financial MistakesPublished on Thursday 10th March 2011
Oxfam says Ghana's new oil law will not protect it from making the same financial mistakes as established oil producers such as Angola and Nigeria.
The Petrol Revenue Management Bill that Ghana's parliament ratified on March 2 is to regulate how the country spends and saves the $1 billion in oil money it expects to reap this year alone, an amount that is equal to two-thirds of the government's total anti-poverty spending.The new law will require Ghana's government to publish a breakdown of all the oil-related money it receives and where it goes. It establishes watchdog groups to keep an eye on the oil money.But policy group Oxfam International says those rules alone are not enough to prevent this region's newest oil exporter from repeating the mistakes of its oldest oil giants.Nigeria, Angola, Cameroon, Equatorial-Guinea, Republic of Congo, and Gabon - all west and central African states - have been pumping hundreds of millions of dollars worth of oil a day for decades. But that oil windfall has typically failed to bring even mundane improvements in the lives of people in those states, the majority of whom live on less than $1.25 a day.Ghana could suffer a similar future, Oxfam Policy Manager Ian Gary says, if the country does what its neighbors did and uses oil revenue as collateral for government loans.Unfortunately, he said, the final law stripped a provision that would have prevented Ghana from doing just that - taking on risky debt with the false sense of security that petrol profits will one day pick up the tab."In many cases such as Angola, Congo-Brazzaville, and others, the condition under which they took oil-backed loans were very opaque," said Gary. "The terms were not known to the public and the interest rates were really high. So without any public discussion, the officials were basically mortgaging the future at very bad terms."Ghana, he said, may be already inching towards that fate.The state has taken out a staggering $750 million loan in the form the eurobond in 2008. Ghana's state-owned National Petroleum Company is also looking to borrow $500 million in start-up cash - a loan Gary fears, will be backed with the promise that some future oil windfall will pay off the loan if the company can't."There's concern that before Ghana even starts to really produce significant quantities of oil that it will have mortgaged a lot of that money," added Gary.There are other, more intransigent concerns, too, he says for this country that may be an example against corruption within its region, but is still ranked 62nd in Transparency International's rankings of how 178 countries fare against corruption.A series of 2009 investigations on how the country's nascent petrol proceeds were being spent found "leakage," Gary said, between the oil wells and the schools and clinics they were meant to fund."It's a question of how quickly Ghana can build its capacity to not just spend money, but spend money wisely," explained Gary.In his state of the nation speech this year, Ghana's President John Atta Mills said his government will account for 100 percent of the country's petrol proceeds.