Much has been written in recent times on how Ghana has been getting it right on many fronts, notably politics and economy. President Obama’s choice of the country as one of the very few in Africa he visited in 2009 was another strong statement on the place of Ghana in this region. Even if some of us that have strong presence on the internet are not happy with the negative and stereotypical attitude of many Ghanaians to matters Nigeriana, we still must give it to this country that best fits the description “Nigeria’s twin”, if anything like that exists.
With such mixed impression about Ghana and Ghanaians, I was probably the most attentive at Golden Tulip Hotel, Accra, venue of an oil and gas tax professionals gathering, when respected Ghanaian economist and tax practitioner, Abdallah Alli-Nakyea, took us through developments in his country’s oil and gas sector. That Ghana is now an oil producing country is not the news, but the management of the resources in this country that has not fared bad, even in its pre-oil era.
Unknown to many people, including this writer until the Accra event, Ghana had actually started exploring for oil since the last quarter of the 19th century, about the same time the process started in Nigeria. While hydrocarbon was discovered in commercial quantity in Ghana in 2007, Nigeria was already close to celebrating half a century of shipping crude oil. Today, Ghana produces about 120,000 bpd of crude oil in its Jubilee field. Ghana’s output per day, even when stripped to per capita terms, surely pales into insignificance compared to Nigeria’s 2.5m bpd, but with that country’s recent history in better management of resources, I will not be surprised if this country achieves more tangible results from its oil find than Nigeria has done in its over 50 years as an oil producing nation. Yet, there are socio-political and economic lessons both countries can learn from each other as oil brings them further together.
As we rubbed minds at the Accra event, Eben Akinyemi, a Nigerian tax expert and lead facilitator, called attention to the worrisome stagnation in Nigeria’s crude oil output. Nigeria, Akinyemi noted, had hit 2m bpd milestone since the Gowon/Murtala/Obasanjo era of the mid-70s, and, in fact, the popular statement allegedly by one of the top government official at the time that our problem was not funds but how to spend it was hinged on this boom at a time our population was one-third of what it is today. The question now is: why is our production, thirty years later, still hovering around 2m to 2.5m bpd? This is very ironic given the fact that we now have many operators in the industry and billions of dollars have been pumped into the system since then. Definitely, this is not a path our West African brothers would want to tow.
Another very important pointer to Ghana’s foresightedness was putting in place petroleum legislations far back 80s, two decades before commercial oil find. It is noteworthy that Ghana National Petroleum Corporation (GNPC), the equivalent of our own NNPC, has been in existence since the early 80s. This is in contrast to our own fire-brigade approach here. Although the Ghanaian governments are now tinkering with their petroleum laws, akin to our PIB, a lot of the issues surrounding commercial arrangements in the industry have been settled by these laws that pre-dated petroleum production. This is a very important step by Ghana.
There is also the area of government take from the petroleum operations. Nigeria’s current PIB seeks to optimise (take that as increase) government’s take from the petroleum activities. This is mainly through royalties and taxes. Nigeria’s existing petroleum taxations framework takes between 50-85 percent of taxable income as taxes for companies engaging in petroleum operations. The PIB seeks to abrogate that and subject petroleum operating (upstream) companies to the Company Income Tax regime that takes 30 percent as tax, and introduces a new tax regime called hydrocarbon tax at 50 percent. This effectively brings back the tax take to 85 percent of taxable income. Our Ghanaian brothers appear to be more lenient with 35-50 percent as tax take. The reason for this may be simply that the country needs investors in the industry at this time and a friendly tax climate can only be helpful to the achievement of that goal.
Like many African countries, resource curse, otherwise known as Dutch disease, is bedevilling Nigeria. Resource curse is a paradoxical situation where natural resources endowment, rather than bring positive impact, ends up constituting setback to a country. Nigeria was doing great before attention shifted to oil in the 1970’s as its main revenue spinner. I attended Obafemi Awolowo University, Ile-Ife, and I am still amazed at the wonder income from agricultural produce (cocoa) did. The difference simply boils down to the management of these revenues. The leaders of that era managed the earnings from cocoa, groundnut, rubber, etc so well; but with the billions of petro-dollars available to successive regimes after them, the country has continued to retrogress. Even though Ghana is not new to commercial production of natural resources, as it has been raking in million dollars from its goldmine, whether the Dutch disease that followed Nigeria’s shifting of attention to oil will also affect it is a question development economists are still asking. But good for them, signals are not pointing to that negative direction.
Ali-Nakyea, in trying to draw similarities between Nigeria and Ghana in national politics, jokingly referred to how some events that happened in Nigeria repeated themselves in Ghana, most notably Nigeria losing a sitting president in 2009, and Ghana experiencing same three years later; plane mishap, even if minor, happening in Ghana on June 2, 2012, and a worse air disaster happening in Nigeria the next day. Probably motivated by the Niger Delta agitation they read of Nigeria, the southern Ghana youths have also come up under various platforms to agitate for right share in the revenue from oil produced in their region, even if their logic collapses when faced with the fact that the country has sustained on cocoa and gold produced in other regions before now. While I sympathise with our Niger Delta brothers in Nigeria, I do not think carrying arms against the state is something our coastal Ghana youths should borrow from Nigeria. The Ghanaian government, of course, will do well to put in place proper framework to take care of various concerns. Otherwise this may turn out to be one of the legs through which the Dutch disease may penetrate the former Gold Coast.