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Ghana Petroleum Revenue Management Act: Back to Basics

May 16, 2017 by oilgas in News in Brief with 0 Comments

 

Ghana’s Petroleum Revenue Management Act (PRMA) has arguably improved the transparency of petroleum revenue allocation. This is borne out by Public Interest and Accountability Committee (PIAC), Ministry of Finance, Ghana National Petroleum Corporation and Bank of Ghana publications regarding how much petroleum revenues are collected and where they go.

However, there are concerns the Act has not adequately addressed issues relating to revenue volatility and expenditure smoothing, or contributed to overall fiscal sustainability. Petroleum revenue management in Ghana, guided by the legislation, faces critical challenges. Many complexities in executing and interpreting the PRMA have also caused digressions from the spirit of the Act. Therefore, there is an urgent need to go back to the basics to align with the core principles of the PRMA and to identify and consider potential reforms.

This brief highlights some of the implementation challenges of PRMA provisions. It makes recommendations to improve petroleum revenue management in Ghana in the future. This discussion is particularly important for Ghanaians now: the implementation of new social programs like free senior high school (“Free SHS”) will rely in part on petroleum revenues and require a sustainable financing plan. We identify five priorities for the consideration of the Ghana government as it seeks to enhance the country’s approach to petroleum revenue management:

  1. Maximizing transparency of projects funded by the Annual Budget Funding Amount (ABFA) and linking them to a national development plan
  2. Making benchmark revenue projections serve their intended purpose
  3. Emphasizing the role of the PRMA in broader public financial management
  4. Carefully scrutinizing resource-backed infrastructure loans
  5. Fully empowering the Public Interest and Accountability Committee

MAXIMIZING TRANSPARENCY OF ABFA PROJECTS AND LINKING THEM TO A NATIONAL DEVELOPMENT PLAN

Most resource-rich countries that have managed petroleum revenue spending well developed strategic plans to guide their expenditure. Botswana, a resource-rich country guided by its National Development Plan, invests its mineral revenues primarily in education and health: these sectors have the potential to generate sustainable alternative streams of income for the economy long after the nonrenewable natural resources have been exploited. When resource revenues are invested in sectors of the economy where the impact is likely to be great within a relatively short period of time, such investments can help to reduce poverty.

The PRMA provides for spending to be guided by a long-term development plan. However, Ghana has yet to develop such a plan and the selection of ABFA priority spending areas has been insufficiently connected to a long-term strategy. Successive ministers of finance have thus selected ABFA priority spending areas based on their discretion since Ghana began producing oil in 2010. As such, these “selected ABFA priority areas” have often faced challenges, because there is not always strict compliance with the selected areas when it comes to disbursing ABFA funds.

A national development plan or medium-term strategic framework would enable the government to more realistically manage the expectations of Ghana’s citizens about the petroleum sector’s contribution to national development. With petroleum revenues contributing an average of 4 percent of the national budget from 2011 to 2016, such revenues are very limited in their ability to contribute to significant improvements in the lives of Ghanaian citizens. A transparent process of determining national spending priorities and outlining how much each sector of the economy would thus contribute would reduce distrust and suspicion that citizens have around petroleum sector management.

Petroleum sector transparency measures can also be improved. The government has consistently published information on allocations to the four ABFA priority spending areas as well as the list of projects being funded. But other critical information remains somewhat elusive. There is still inadequate information regarding the total value of projects that have received petroleum funds; their expected date of commencement and completion; contractor details; and their stages of implementation. This reduces the impact of PRMA-mandated transparency by making it more difficult for citizens to get a sense of the big picture on projects funded by ABFA.

Going forward, future petroleum revenue allocations should be guided by strategic medium-term plans that align with national priorities shaped through public consensus. Also, detailed information on ABFA-funded projects is important. This information might include the list of projects financed by the ABFA and their respective allocations, the project locations, their stages of completion and the contractors executing such projects. This will help make ABFA spending more transparent and ensure that projects funded by the ABFA are in line with national priorities developed through national consensus and enshrined in a detailed medium- to long-term strategic national development plan.

MAKING BENCHMARK REVENUE PROJECTIONS SERVE THEIR INTENDED PURPOSE

The benchmark revenue calculation is a critical part of the PRMA. It determines the proportion of petroleum revenues that can be spent and saved at any given point in time. Despite its importance, the benchmark revenue calculation is not well understood by Ghanaian policy-makers and the public. Apart from the calculation’s complexity, it has also often been mischaracterized as a projection tool designed to forecast expected petroleum revenues when it should be used solely for determining how much revenue is spent versus saved. In practice, the government has repeatedly interpreted benchmark revenues as expected revenues in national budget estimates, despite past revenues being included in the calculation.1

This has muddied public understanding of the difference between benchmark revenues and expected revenues. As a result, public judgment has focused on how the moving average model has poorly predicted petroleum revenues rather than seeing it as a benchmark for budgeting purposes. Benchmark revenue is calculated using the product of two moving averages:

  • A seven-year average of oil prices that includes the past four years, the current year and two forecast years
  • A three-year average of the government’s take in oil that includes a one-year forecast

Using the moving average calculation for budgeting purposes implies that when revenues are high, the government builds up surpluses, and when revenues are low, there are shortfalls. In this way, the government attempts to smooth expenditure by following a repeated cycle of building up savings and depleting them over time. This expenditure smoothing helps to mitigate the effects of revenue volatility and ensures that government projects are not severely affected when there are revenue shortfalls. The spirit behind the adoption of a moving average is to ensure that government spending adjusts slowly to either a sharp fall or sharp rise in prices. This is why the Ghana Stabilization Fund (GSF) was set up to act as a buffer during shortfalls. However, in the recent past, placing a cap on the stabilization fund has limited the ability of the fund to fully serve its intended purpose.2 The confusion around interpreting benchmark revenue as projected revenue has forged the basis for government interference in the benchmark revenue approach to dealing with revenue volatility.

It is important that the rules for calculating benchmark revenue are clear and transparent. We believe the government can invest more heavily in communicating to the public that benchmark revenue is estimated solely for budgeting purposes.

This would reduce the common misconception that benchmark revenue is synonymous with a government projection.

EMPHASIZING THE ROLE OF THE PRMA IN BROADER PUBLIC FINANCIAL MANAGEMENT

The trickle-down effects of poor management of the other sectors of the Ghanaian economy are likely to more than net out the positive effects of the efficient management of petroleum revenues if there are no laws in place linking petroleum revenue management to broader public financial management in Ghana. Ghana’s PRMA is focused on ensuring fiscal expediency in petroleum revenue management, without recourse to the other sectors of the economy.

Petroleum revenues have constituted only about 4 percent of Ghana’s annual budget on average since the commencement of oil production. These revenues are also subject to world oil prices, which can fluctuate dramatically and have been low the last few years. Hence, attempting to manage 4 percent of Ghana’s economy efficiently is unlikely to translate into broader fiscal discipline in public financial management. For instance, in 2014, although the government saved about GHS 1.7 billion in the petroleum funds, it also increased public debt by about GHS 70 billion. Annual interest rates on Ghana’s Eurobond debt are in the range of 8 percent, while returns on savings in the sovereign wealth funds have averaged approximately 1.15 percent over the last six years (2011-2016).

Although the PRMA has effectively delivered improvements in transparency in revenue allocation and utilization, it has faced many broad challenges related to revenue volatility, expenditure smoothing and overall fiscal sustainability. Given petroleum’s relatively small role in Ghana’s economy, the PRMA alone has not been able to adequately support budget sustainability. As a result of an increasing budget deficit funded through borrowing, even more so since the discovery of oil, Ghana’s growing debt and interest payments have caused severe macroeconomic woes for the economy that threaten to worsen in the near future. Since the inception of oil production in Ghana, interest payments on debts have averaged about 5.14 percent of GDP. In 2016 alone, Ghana’s interest payments on loans amounted to GHS 10.77 billion, representing 6.4 percent of GDP, and about 29 percent of total domestic revenue collected. This means that for every GHS 1 collected in revenues in 2016, GHS 0.29 was spent on interest payments. In the absence of a public financial management framework with fiscal rules on aggregate borrowing and savings, the public debt has now escalated to over 70 percent of Ghana’s gross domestic product. Ghana’s worsening fiscal position has contributed to the rapid depreciation of the Ghanaian cedi, escalated inflation and a general decline in economic activities. For instance, Ghana recorded its lowest economic growth rate in 25 years in 2015.

Sections 13 to 17 of the recently enacted PFM law (Public Financial Management Act, 2016)3 indicate broad fiscal objectives for the government. However, there is no clear information on specific fiscal targets on debt, government spending and taxes. The new government’s intention to pass the fiscal responsibility law is a step in the right direction. The law should, however, incorporate robust, specific numerical targets at aggregate and sector-specific levels. Under their structural fiscal balance rule, 4 countries such as Chile, adopted numerical targets and a methodology for execution of those targets.

Chile’s structural fiscal balance rule has three components. First, it sets a deficit target assuming the economy is operating at its full potential and the price of copper (the country’s main export) is at its long-term level. Second, it sets out a procedure to estimate how far the country is from its target using inputs from independent experts. Finally, it provides the formula for how the target should be reached over multiple years. As a result, the rules allow the government to borrow in bad years and save revenues in good years while maintaining an objective of long-term sustainability.

Peru also has a Fiscal Responsibility and Transparency Law. It establishes a deficit limit and expenditure growth rule. In both Chile and Peru, the legislation also requires an independent body to oversee the execution of the fiscal rule. To be effective, fiscal targets, policies and indicators outlined in the fiscal responsibility law should be aligned with existing rules in the PRMA.

Since Ghana is heavily reliant on primary commodities subject to fluctuating prices, in addition to being an import-reliant economy, it needs fiscal rules for managing aggregate levels of debt, expenditure and savings, as well as rules for managing the same at the sector level. These fiscal rules will help with building up savings buffers to enable the economy to better respond to shocks. Botswana has successfully implemented these rules in a coordinated fiscal framework; Ghana can learn important lessons from Botswana’s example.

CAREFULLY SCRUTINIZING RESOURCE-BACKED INFRASTRUCTURE LOANS

Resource-backed financing is the practice of using a country’s resources to serve as a guarantee for loans from international financial institutions and/or governments. In Africa, this practice began in Angola, when Standard Chartered identified and assisted the country with funds to finance its war against Jonas Savimbi’s UNITA rebels. At the time, Angola had a low sovereign credit rating, and Standard Chartered agreed to a financing arrangement where funding for Angola’s ongoing conflict was guaranteed by future petroleum revenues. By the end of the war in 2002, Angola had subscribed to 48 oil-backed loans. The practice is now commonplace in resource-rich countries in Africa, with banks such as BNP Paribas of France, Commerzbank of Germany, Exim Bank of China, National Development Bank of Brazil and other institutions participating in such loans.

If resource-backed loans are effectively managed within a robust governance context, they may help to generate productive returns. Efficient management of such facilities might also help build much-needed infrastructure for economic diversification of subscriber countries to create multiple streams of income. Across Africa, governments have struck a growing number of deals with foreign entities using resource revenues as securities to finance infrastructure. But many of these deals have been shrouded in secrecy. For instance, Ghana’s USD 3bn loan from China Development Bank (CDB) to help in building the Atuabo gas plant and non-oil-and-gas-related infrastructure has faced many spending, regulatory, tax leakage and oversight challenges.

In Ghana, public investments do not easily translate into commensurate additions to physical capital. There are many reasons why public investment delivery remains weak. For instance, there are often challenges with project appraisal and selection, leading to delays in execution when projects are finally selected.

The CDB loan faced similar problems. Spending challenges and delays in execution resulted in penalty costs, forcing the government to renegotiate the facility to USD 1.5 billion. Also, deficits in institutional oversight and access to information also limited parliament’s ability to properly scrutinize the contracts to ensure that they served the best interests of the nation. Per Ghana’s constitution, contracts between the government and foreign entities need to be ratified by parliament, and any taxes to be accrued from such projects also need to be determined by parliament. However, parliament did not have enough information to scrutinize the Atuabo gas contract and its subcontracts and determine applicable taxes for the contractors.

The contracts contained several tax exemptions for the executors where information was not provided for parliamentary scrutiny and approval. By granting tax waivers to the executors without parliamentary oversight, the government of Ghana lost substantial revenues that could have been channeled into the budget to be used in development projects. In addition, the lack of a clear distinction of mandates for Ghana’s two energy sector regulators, the Petroleum Commission and the Energy Commission, compromised the ability of these institutions to ensure that internationally acceptable standards were applied in executing the contract. The Energy Commission’s mandate gives it the authority to oversee energy related activities in Ghana and the Petroleum Commission mandate gives it the authority to oversee petroleum-related activities. However, in this instance, there was confusion as to which commission had the clear mandate to oversee the Atuabo gas plant: it utilizes gas from the Jubilee field to generate an energy mix due to the overlapping responsibilities over gas inflow to the Atuabo gas plant.

In Ghana’s case, the resource-backed infrastructure loan almost equaled total receipts from oil production since inception. The government must ensure absolute transparency in such dealings to ensure that loans are used for their intended purposes. Mandates of industry regulators should also be clearly defined in law and strictly enforced to ensure that there is no duality of roles. This will help make industry regulation more efficient.

In the future, government executives must provide all information required for state institutions to conduct due diligence in approving resource-backed infrastructure contracts. One way of building the capacity of oversight agencies is to provide all applicable information and equip those agencies with tools to effectively scrutinize the information.

FULLY EMPOWERING THE PUBLIC INTEREST AND ACCOUNTABILITY COMMITTEE

The role of the Public Interest and Accountability Committee (PIAC) in ensuring transparency in the utilization of petroleum revenues cannot be overemphasized. The PIAC plays a pivotal role in tracking government spending of petroleum revenues and communicating that spending to citizens of Ghana. The government must focus on building PIAC’s capacity to deliver on its mandate to the people of Ghana by providing the much-needed financial support to enable the committee to function smoothly. In addition to providing financial support, the government could also collaborate with PIAC to create more awareness on what plans exist for spending petroleum revenues and how these revenues are expected to impact the lives of Ghanaian citizens, especially those living in remote parts of the country.

A practical way for the government to collaborate with PIAC in improving transparency is through drafting the citizens’ budget. The citizens’ budget, first published in 2015, did not include information on petroleum revenue. In drafting future citizens’ budgets, the government could invite PIAC to work in collaboration to restructure the budgets to incorporate sections on petroleum revenue spending in simple language that ordinary citizens can understand. Information on petroleum revenues accrued and how the revenues have been spent could then be accessed by citizens. This could include the list of projects financed by the ABFA and their respective allocations, the locations of the projects and the stages of completion.

 

In addition, PIAC could draft up separate manuals on an annual basis that use infographics to provide a breakdown of government spending of petroleum revenues for citizens unable to read and write. These efforts could go a long way in motivating citizen interest in how government spends petroleum revenues and improving citizen oversight. This will help the government hold contractors accountable for different projects in the pipeline.

There is still great potential for Ghana’s oil and gas sector. The TEN field, which is already on-stream, and the Sankofa field, expected to come onstream this year, are projected to provide a boost to government revenues. The rules of petroleum revenue management need to be strengthened to ensure these additional revenues are used more prudently and effectively. Ghana needs strategic national development planning; a strong public financial management framework embodied by sound fiscal rules; and entrenched transparency and accountability provisions. These checks will ensure additional revenues are prudently managed to yield the highest possible returns for the greatest benefit of Ghana’s citizens.

By Aisha Adam, NRGI

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Revenue mobilization from the oil sector for Agricultural production in Ghana, a myth or reality?

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    • Comment by Godwill Arthur-Mensah,my take on the mobilization of oil revenues

    I strongly believe that the petroleum revenues had not been strategically invested in the agricultural sector and I agree with Dr. Ishmael Ackah, the Head of Research, Monitoring and Evaluation at the Africa Centre for Energy Policy (ACEP), who stated in a forum in Takradi last year that Government have not made strategic investment in agriculture because in 2014 budget, 70 percent of the agriculture budget went into the construction of  four sea defence walls projects, instead of food crop production or aquaculture.

    Currently, the cost of cassava is very high in the Western Region and in other parts of the country because the demand had outstripped supply due to decline in production.

    Over the years, growth in the agricultural sector had declined, recording growth of 7.4 per cent in 2008 followed with 7.2 per cent, 5.3 per cent and 0.8 per cent in 2009, 2010 and 2011 respectively, according to statistics available to the Ministry of Food and Agriculture.

    It is unfortunate that Government had been replacing its normal allocation to the agricultural sector with petroleum revenues allocation as determined by the Annual Budget Funding Amount (ABFA), instead of the Petroleum revenues complementing the usual allocations.

    Moreover, some peasant farmers in the Western Region had complained bitterly that oil and gas companies had bought arable land meant for agricultural purposes for the construction of their warehouses and thus, deprived them of their livelihoods.

    Godwill Arthur Mensah

    GNA, Regional correspondent(Western Region)

    mensahgodwill@gmail.com

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    Comments by Justice Adoboe

    Ghana must avoid making the oil and gas sector another enclave economy.

    Ghana must avoid making the oil and gas sector another enclave economy as the mining sector has been over the years. The fact that our oil sector is a very small one whose direct  impact on the economy in general is quite negligible so far is the same reason part of the revenue accruing from the sector should be re-invested in agricultural development.

    Petroleum can cease to flow tomorrow, but our arable lands which are crying for cultivation will still be  there, investing and the decisions and efforts we make today at investing in the agric sector modernization is what will determine our food security tomorrow.

    As Climate Change is becoming a reality in our case with prolonged drought, short periods of rain but causing severe flooding, especially affecting the northern sector which is Ghana’s granary and the source of legumes and many root crops, the need  of investing in  irrigation across the length and breadth of the country is no more a in doubt but an issue demanding immediate action.

    If we can invest in a quarter of the 1.9 million hectares of irrigable land the country has, we can be assured of an all-year round production of certain key food crops that we spend scarce foreign exchange importing today

    so far only 28,000 hectares of irrigable lands have been irrigated across the country, so you see why we keep importing tomatoes from Burkina Faso.

    Beyond investment in crop cultivation, we also need investment in the other portions of agriculture value chain, talking about input production, storage and timely  supply, modern harvesting, drying and storage methods and facilities.

    As we see investments coming into cocoa processing so also must we invest into food processing and marketing in order to prolong the availability of our key staples.

    If we put these things into practice, the need for GMOs for higher production won’t arise.

    Meanwhile, as we do these investments, the number of those going to be in direct cultivation would reduce, but the other portions along the value chain that would be developed, input production, storage and distribution; drying, processing; storage as well as marketing have the potential to yield more jobs that are higher paying than the sector does now.

    Taking the first step of putting money into the real needs of the agriculture sector is key. As for the reason it was the agric sector investment that had its budget slashed last year as a result of the oil price drops I think was a decision not well thought-out.

    Justice Lee Adoboe

    Senior Correspondent Accra Bureau of the Xinhua News Agency

    devitor2002@yahoo.com

    web: www.xinhuanet.com/enlish-Africa www.fighana.com

     

     

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    MESSAGE FROM DR ISHMAEL ACKAH:  Revenue mobilization from the oil sector for Agricultural production in Ghana, a myth or reality?(DISCUSSION)

    1. Is there a relationship between the fortune of the agriculture sector and a rise of the oil and gas sector?
    Answer: Yes. The oil sector affects agriculture in two main ways. First is the labour  mobility effect. The oil sector draws on the agriculture and other sectors for labour. There are instances where the youth especially leave their farms to go and look for non-existing jobs in the oil sector,. Second, increased foreign exchange into the economy can lead to the appreciation of the cedi and make agriculture inputs expensive, which will in turn make agriculture exports expensive and non-competitive. Both channels can lead to reduction in agriculture output.
    1. What are the drivers or rationale to move resources from oil and gas to agriculture sector?
    Oil resources have two main limitations. First, since oil prices are volatile, revenues are volatile too. Second, oil resources are exhaustible. Due to these reasons, countries that have been successful in managing their oil resources well diversify. Since agriculture provides a competitive advantage to Ghana in terms of fertile land, cheap labour and productive, it is important to build the agriculture sector with oil revenues to serve as a buffer during oil price shocks.
    1. Which countries are suffering a decline in agriculture due to the discovery of oil and gas?
    Nigeria was once the number 1 palm oil producer in the world before oil production started around 1958.
    1. Does Ghana have an inter-sectorial link between the Petroleum and Agriculture ministry?
    No.However, the Finance Ministry usually unofficially serve as the link between different Ministries
    1. Is it a reality that revenues from the oil sector has been mobilized for Agricultural development or not?  If it is what are the things to show?  How many people have benefited from the Oil revenue in the agriculture sector?
    Agriculture is one of the four priority areas that have received oil revenues over the past 5 and half years. Agriculture received about 9.2% of the total oil revenues in the first 5 years. This is relatively low compared to GNPC’s 39%. There is little to be shown for this investment since the sector faces challenges such as oil revenues substituting instead of  complementing traditional sources of funding such as IGF, GOG and development partners. In addition, there are issues of misapplication. For instance, in  2014, 170,62 million Ghana cedis or 43.91 million U.S. dollars was allocated to the agriculture sector from oil revenues.Out of this amount 69 percent went into sea defence projects. Finally, allocation from oil revenues to agriculture has seen a ”see-saw” trend. For example, in 2013, 2.5% of ABFA wa allocated to agriculture. This increased to 31% in 2014 and reduced to 3.5% in 2015. In 2016, it is projected to be 28%. This affects proper planning and productivity. The sector needs an investment plan, guided by effective monitoring and evalutaion and measurable indicators
    6. Oil Revenues as Substitutes instead of complement to the Agric. sector
    Yes. Oil revenues now constitute more than 90% of the capital and goods and service budget of agriculture. This means agriculture will be affected most when there is low oil prices.
    7. Low level  of oil revenues investment in agriculture
    Yes. agriculture has received only 9.2% of oil revenues over the past 5 years.
    8. Have the oil producing districts shown decline in the Agriculture production?
    The oil is produced offshore and the fishermen have been complaining about low catch since the oil production. Alternative livelihood systems have been developed by oil companies.However, it should be institutionalized and properly targeted.
     Inline image
    Ishmael Ackah, Ph.D
    Head of Policy Unit 
    Africa Centre for Energy Policy (ACEP)
    Accra-Ghana
    Email: ackish85@yahoo.com
    Repec:https://ideas.repec.org/e/pac69.html
    Academia: https://port.academia.edu/IshmaelAckah
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    Comment from Malise Otoo- THE MYTH OF OIL REVENUE IMPACT ON AGRIC IN GHANA

    My take on this issue is that the development of Agriculture in Ghana as a result of oil is purely a myth with very little result to show for.

    A 2014 Annual Report of the International Fund for Agriculture Development (IFAD) suggests that West and Central Africa received in excess of US$157.8 Million representing about 22.1% of the total share of  US$713.4 Million funds for financing programmes and projects approved in 2014 alone.

    Although IFADs core mandate is to finance the growth of Agriculture and its value chain to ensure food security in countries, it has interestingly started funding natural resource management especially in cities where these God-given resources are found.

    The following is how the various sub-sectors were impacted through the distribution.

    Agriculture and natural resource management – 32%, Market and related infrastructure – 16%, Rural financial services – 13%, Others 13%,

    Policy and institutional support – 10%Community-driven and human development – 8%, Small and microenterprises – 7%

    Therefore, in 2014 Ghana received its share of the funds distributed  with a breakdown as follows;

    GHANA: Ghana Agricultural Sector Investment Programme (GASIP)

    GASIP will work to reduce poverty in rural Ghana sustainably.

    It will have three components: value chain development; rural value chain infrastructure; and knowledge management, policy support and coordination. Smallholder farmers and resource-poor rural people will be the main targets, particularly women, young people (aged 15-24 years) and young adults (aged 25-34 years). This national programme will be governed by a demand- and market-driven approach. The initial design and financing will cover the first two cycles (six years).

    Approved loan amount: SDR 23.7 million (equivalent to approximately US$36.6 million)

    Approved ASAP grant amount: SDR 6.5 million (approximately US$10.0 million)

    Total programme cost: estimated at US$113.0 million, of which national government will provide US$7.6 million, beneficiaries US$4.6 million, districts US$1.7 million and participating financial institutions US$17.5 million. IFAD is expected to seek additional financing of US$35.0 million in 2016-2018

    Approximate reach: 55,000 households .

    Although Ghana discovered oil in commercial quantities in 2010, and attained middle-income status in 2011, the overarching effect of oil revenue on Agric in this regard is yet to be felt with Agriculture contributing only some  0.04% of GDP.

    We should perhaps take note that Ghana has also been the largest recipient of IFAD‘s loans and grants in the West and Central Africa region since 1980.

    As a journalist, it beats my imagination why these resource nations find it extremely difficult to adequately fund Agriculture which employs the majority of its people. Perhaps Ghana is not alone in this struggle. Uganda, Mozambique and Tanzania can all be fingered. But this should no way be an escape for our leaders to sit up and salvage the situation.

    Finally, the recent Panama Papers which exposed two sons of prominent leaders allegedly involved in illicit financial flows and tax havens i.e Former President John Agyekum Kufour and Kojo Annan, son of former UN Secretary General Kofi Annan should not be swept under the carpet.

    Civil Society organizations like ACEP in Ghana should not be hypocritical to this and they cannot turn a blind eye on the matter. Ghanaians need to be educated on the truth on the issue and certain outcomes reached in this regard.

    Malise Otoo

    Managing Editor,
    Ghana Daily News
    No. 10A Christianborg Castle Road, Osu-Accra, Ghana
    P.O.Box DK 817, Darkuman, Accra
    listeningp.gh@gmail.com
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    Comments from Tanko Mohammed Rabiu
    OIL FOR AGRICULTURE
    As Ghana congratulates and award farmers today in Bolgatanga in the upper east region, a lot of farmers’, agriculture experts and energy experts are calling on the government to invest heavily in agriculture from the oil revenues. This according to them agriculture contributes faster to poverty reduction than does industrial investments. Agricultural spending has wider redistributive effect citing some examples; Indonesia used its oil rents to supply fertilizer to farmers and develop new crops, building the basis for the country’s green revolution. They also invested heavily in agricultural research to identify new commodities that could improve on export potential. Malaysia invested its oil revenues into forestry and palm oil, building very successful industries. Chile, used proceeds from copper to invest into new agricultural commodities, such as salmon, a product that had not been part of the country’s export products before and other countries who are also using oil revenues to improve in agriculture.
    At the height of the global financial and economic crises in 2007, Ghana discovered oil and gas in commercial quantities estimated at 1.8 billion barrels reserves. In spite of the modest production levels, oil has now become the second largest export of Ghana – US$2.7 billion in 2011 to US$3 billion in 2012; following gold and overtaking cocoa since then. Ghana is also gradually becoming a net exporter of crude oil with oil imports of US$3.3 billion in 2012 versus oil exports of US$3 billion. Over the last 4 years, Ghana earned about US$2.7 billion in revenues to the state. With new discoveries being developed, Ghana could earn more from its share of crude oil. With increasing oil revenues as a result, many are skeptical if Ghana can avoid the curse of oil and transform its oil wealth into positive development outcomes.
    In Ghana, research has shown that at the national level, agricultural public expenditures have the highest returns in terms of agricultural productivity. For one marginal cedi invested in agriculture, GH¢16.8 is returned, feeder roads – GH¢8.8, Health – GH¢1.3. In spite of the potential of this sector to contribute to the country’s development, there continue to exist a wide funding gap in public expenditure. Agricultural share of public spending is currently at 8.5%, which has been insufficient to generate the levels of growth that would reduce poverty levels significantly. This is lesser than the Maputo Declaration of a minimum spending of 10%. If Ghana is to become a full middle-income country by 2015 and see decline in poverty rates of almost 70 percent, the share of agricultural expenditure in public spending would have to almost double from the current 8.5 to 14.1 percent.
    Nevertheless, Allocation of oil revenues to agriculture was increased in the 2014 Budget from GHS20 million in 2013 to GHS136 million in 2014. Agriculture share of oil revenues were allocated to investments focused on small holder farming but farmers are asking for more improvement in the sector. In a telephone interview with the 1996 national best farmer Aloko Dongo who is still in active farming expressed his dissatisfaction on the declining state of agriculture saying farmers do not have access to credit facilities to enhance in their activities. He said many a times a lot of farmers commit suicide after failing to pay back loans taken from financial institutions and said lack of access to market, storage facilities and disease control.
    Speaking to Dr. Amin Adam, the executive director for Africa center for energy policy, ACEP, in an exclusive interview after his presentation on political economy of Ghana’s oil and gas sector/follow the money at a media training for journalist in the extractive sector, said agriculture is the easiest way to reduce poverty in Ghana looking at the scope of the agriculture industry where the sector has more working force. He said there is the need for more citizen participation in decision making process I the oil and gas sector so as to benefit the poor and the vulnerable.
    On the morning of the national farmers’ day celebration, TV3’s morning show “new day” hosted O.B Amoah, a member of the NPP, John abdulai Jinapor deputy minister of power and a member of the CPP. All the panelists reiterated the need for government to invest more of the oil revenue to agriculture and mean while John Jinapor said despite these challenges, government is investing a lot in agricultural industrialization from different funding sources examples like the fomenda sugar factory, shea butter factory at Buipe, rice mills in Tamale and Nasia.
    According to the 2015 budget, 3.95% of the total budget went to agriculture and only 1.39% was spent and in the 2106 budget it declined to 3.5% which according to agriculture expert is not encouraging and not good for a developing country like Ghana. An amount of GHC 501,501, 708.00 is allocated to the agriculture ministry representing 3.5%.
    Most of the farmers I spoke to want more share of the oil revenue to agriculture because agriculture is the most easiest way to reduce poverty and the only sector where the poor can make livelihood from without huge investments.
    The table below shows how oil revenues were allocated to agriculture from 2012 to 2013.
    ALLOCATION OF OIL REVENUES TO AGRICULTURE
    A DECLINING TREND
                                                                                                                                                                                                                                                                           SECTORS                               ABFA 2012        RANK     ABFA 2013    RANK
    Office of the President
    65,000,000
    2
    20,000,000
    Parliament of Ghana
    5,000,000
    Finance and Economic Planning
    9,000,000
    28,850,000
    6
    local government
    15,000,000
    5,000,000
    Food & Agriculture
    53,000,000
    4
    20,000,000
    8
    Lands & Natural Resources
    33,840,000
    Trade & Industry
    13,040,610
    5,000,000
    Envir, Science & Technology
    25,000,000
    300,000
    Tourism and Culture
    5,000,000
    Energy
    130,000,000
    1
    130,000,000
    1
    Water Resources, Wrks & Housing
    21,000,000
    59,517,043
    3
    Roads and Highways
    40,000,000
    5
    100,000,000
    2
    Transport
    70,000,000
    3
    40,000,000
    4
    Education
    20,000,000
    10,000,000
    Health
    29,900,000
    5
    Employment & Social Welfare
    10,000,000
    300,000
    Youth & Sports
    22,000,000
    Interior
    25,000,000
    23,000,000
    7
    MDAs Total
    576,008,674
    476,867,043
    Source: ACEP
    Tanko Mohammed Rabiu
    Regional Correspondent, Tamale
    TV3 News Network Limited
    rabiutanko@hotmail.com

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