Oil boom could have both positive and negative ramifications on the Ghanaian economy depending on how the country manages it, the Institute of Statistical and Social Research (ISSER) has disclosed.

In a report, “The Macroeconomics of Managing an Oil Boom: Global Lessons, the economic think-tank pointed out that the boom could affect the economy in a number of ways, including a decline in the manufacturing sector, hence a shift of human resources to the oil sector, and a drop in non-oil revenue.

Nevertheless, the nation can benefit immensely from the oil boom if oil revenue is de-linked from Government expenditure.

In addition, the creation of a stabilization and savings fund as applicable to the well-endowed oil producing countries such as Canada and Norway would enable the country to have a strategic focus for the next generation.

Moreover, oil revenue can help minimise the country’s dependence on foreign aid and grants ISSER conducted studies into four main macroeconomics channels including, the Dutch Disease, which is a term used when The Netherlands could not manage discovered natural gas, inflation and interest rates effects, fiscal implication and capital Inflows.

It also considered lessons from some oil producing countries such as Canada, Sudan, Norway, Azerbaijan and Nigeria.

“For instance, an oil boom could trigger an increase in money supply within the economy, thus increasing inflation but the effect on inflation would depend on other factors such as the extent of the real appreciation of the currency and the propensity to import,” it noted.

Secondly, an oil boom is likely to lead to a decrease in interest rates since supply of loans could rise whilst demand decreases.

On Nigeria, the report noted that the country did not manage its oil revenue well because of corruption and other related issues, culminating in the increase of imports of non-oil goods and a decline in agricultural exports.

The country, it stated, has now established stabilization and savings fund and a price-based fiscal rule, which was introduced in 2004.

According to the report, Nigeria has enjoyed a relatively stable economy in the last 10 years, as fiscal surplus have averaged about 10 percent of the Gross Domestic Product.

The country’s foreign reserves has also increased from $7.4 billion as at the end of 2003 to about $56 billion in 2008, with inflation decreasing from 23 percent in December 2003 to a single digit in 2007 and 2008.

Dr. Robert Osei, a Senior Research Fellow at ISSER, who released the report, stated that transparency must play an integral role in the management of oil resources in Ghana.

Already the nation has signed onto the Extractive Initiative Transparency International (EITI).

Dr. Osei welcomed the move, saying that the oil resources should not be a curse for Ghana but rather a blessing, hence, the need to exhibit efficiency and transparent in its management.  

Still on the lessons for Ghana, the study emphasized the need to increase the non-oil tax effort and also exhibit little compromise on the quality of capital spending.

Dr. Osei emphasized the need to use the revenue to promote a diversified economy in which the benefits would be spread to individuals across the country and future generations.

 By Charles Nixon Yeboah