The Economic Implication of Ghana’s Oil Discovery
Ghana’s Oil Discovery
The Economic Implication of Ghana’s Oil Discovery: the Case Study of Takoradi Community
This paper presents a research proposal which have been prepared for the future research on the economic implications of oil discovery in Ghana. It starts with a brief introduction to the whole case scenario by introducing Ghana and its recent oil discovery and proceeds by explaining the research questions and highlighting the major research objectives. The major part of the paper consists of a comprehensive literature review which has been done to discuss the aforementioned business issue in the light of most recent articles, news, and research publications. The literature review completely focuses on discussing the economic implications of this oil discovery for Ghana from both positive and negative perspective. The research design and data collection section presents the techniques and ways in which the researcher will collect and analyze the data in a specific time span. The final section gives some ethical considerations which the researcher will keep in mind throughout the research process.
Ghana — the fastest growing economy in the African region and among the top ten fastest growing economies of the world has been blessed with various natural resources. Ghana has seen a recent oil discovery in an oilfield when Anadarko Petroleum, Kosmos Energy, and Tullow Ghana Limited officially announced that 3 billion barrels of light oil have been discovered in Ghana which will continue to increase in the future (Institute of Statistical, Social and Economic Research 2012). It was news of great pleasure for the whole African community that this discovery can make them more energy sufficient as compared to many other regions of the world. In this research paper, an effort has been made to highlight all the major benefits and issues which can arise due to this oil discovery (Howard University 2010).
This paper presents a research proposal for doing research in this specific business area and applying business research methods and tools that are relevant to this research. This oil discovery can impact the whole economy of Ghana in both positive and negative way. While Ghana can reap numerous benefits from this oil discovery on one side, it will also see negative consequences on the other side (Tullow Ghana Ltd. 2009). This research proposal will suggest areas which can be researched in order to analyze these benefits and negative consequences.
This topic has been chosen because it directly relates to various areas of Business Management and Economics. For example, by looking at the benefits and drawbacks of the oil discovery in Ghana, the implications on different sectors of the economy can be analyzed which will be helpful for future studies and analysis by business professionals, economists, financial analysts, and business management students. The findings of this research study will not be limited to future studies in Ghana or African region; the business professionals, economists and students will find extensive research material and literature review for relevant research studies.
RESEARCH QUESTION AND RESEARCH OBJECTIVES
The main research question for this paper relates to the implications of this oil discovery for the whole economy of Ghana. That is; what benefits Ghanaians can reap from this oil discovery in different sectors of their economy; including manufacturing and industrial sector, oil, petroleum, and mining industry, services sector, and agriculture sector. In a single sentence, the overall one research question can be presented as follows:
What economic implications will Ghana observe as a result of oil discovery? Can it be a potential contribution to the economic growth of this country or will it lead to greater corruption and worse political conditions in the future.
The Three Main Research Objectives:
The first primary objective of this research study is reflected in its research question, i.e. what impact will this oil discovery bring on Ghana’s economy. This research aims to assess the positive and negative impacts which Ghanaians will see as a result of this oil discovery in their country. The second research objective is to find and critically analyze the relevant literature on oil discovery in Ghana in order to fulfill the requirements of the first research objective. For this research objective, an extensive research will be made from the most recent publications, articles, and newspapers since the discovery of oil in Ghana. This research objective will be fulfilled by exploring and critically analyzing the relevant literature.
The third research objective is to contribute to the existing literature for this specific business management and economics issue. By meeting the requirements of the second research objective, an effort will be made to present critics and thoughts that are unique and can be useful for future researchers in a totally different way from previous available researches. All these three research objectives along with the main research question are completely focused on the literature review which has been done specifically for this oil discovery issue.
The following section presents a comprehensive literature review on the implications of oil discovery in Ghana from a critical perspective. A number of articles and research publications have been consulted in order to get deep insights into how Ghana will benefit from this oil discovery. The literature reviewed is directly related to the research question of this proposal which also aims to answer the economic impacts of this oil discovery. After this literature review, it has been justified that how it relates to the main research question and the three research objectives and what can be researched further to discuss this business issue.
1. Agriculture Sector:
Ghana’s economy is largely dependent on its agriculture sector. More than 50% of the Ghana habitants are directly or indirectly linked with the agricultural sector (Addu 2011). Cocoa and Cashew are the major crops of the country which are exported to earn high revenues every year (World Bank 2009). However, the foodstuff produced in the country is not sufficient to meet the local demand. Therefore, Ghana has to import a variety of products and commodities from partnering countries. Upon oil discovery in Ghana oilfields, the agricultural sector will get numerous benefits in the form of expanded level of production, efficiency in the operations, and a significant decrease in the level of unemployment (Korosec 2009).
(i) Being self-Sufficient in Agriculture:
First of all, the country will become self-sufficient if it will increase its production level up to such an extent that there is no need for importing commodities for the local demand. The new oil reserves can be used to increase the level of production and become capable of exporting the agriculture products to the outside world. The oil discovery in 2007 and subsequently in 2010 can give various benefits to the agriculture sector of the country in the long run. Despite having a major dependence on the agriculture sector, Ghana has not taken it seriously. Malaysia and Indonesia have fully utilized their cultivatable lands to become agriculturally and economically stronger than other countries of the same category (Pyagbara 2007). In contrast, Ghana does not give much importance to its agriculture sector which results in huge expenditures in the form of heavy imports of foodstuff from other countries. For example, Ghana had to import rice worth $500 million for its local demand (World Bank 2009).
(ii) Steps to reap benefits from the oil discovery:
This oil discovery is an attractive opportunity for Ghana to become self sufficient in its agriculture sector. It can formulate long-term development plans for this sector if it wants to make itself economically strong than other African countries. An effective strategy would be to invest the revenues earned from the sale of light oil in the agricultural sector. The development in the agriculture sector can be ensured by giving full support to the Agriculture Development authorities in all the three ways: financially, politically, and operationally. Moreover, the Government can provide financial support to the farmers who are not able to produce anything on their cultivatable lands due to the lack of sufficient money (Management of Ghana National Petroleum Corporation 2010).
The Government can provide them interest free loans on easy terms and conditions so that they can fully utilize their lands and produce the maximum output for the country. In addition, the businesses which are linked with the agriculture sector can also be helped with the revenues from oil industry (World Bank 2009). These businesses can be supported by relaxed taxation policies and regulations so that they can operate their plants and machineries at their full capacity and improve the efficiency of their operations (Walters 2010).
2. Implications for the Services Sector:
The new oil discovery will also have great implications for the services sector of Ghana; especially the Takoradi community will see improvement in various economic and social issues. For instance, it is obvious that the new oil discovery in Ghana will boost up the economic growth which will facilitate the Ghanaian government and regulatory authorities to take better control of the economic measures. The biggest benefit for Takoradi community will be a considerable decrease in the level of unemployment. Reason being, the oil, petroleum, and mining industry will have to boost up their operations in order to match the supply and demand requirements in their own country as well as in the international community. Therefore, they will create more jobs for both skillful and unskilled labor from Takoradi community, Ghana, and the whole African region (Vision Africa Gold Inter-nation Communication Limited 2011).
3. Capital and Investment:
The oil discovery will also help the Ghanaian Government to attract potential investors from all over the world. The oil sector will create attractive investment opportunities in Takoradi and the whole Ghana region for a wide range of businesses that are directly or indirectly related to energy sector (United States Non-Governmental Delegation Report 1999). For example, there are large number of suppliers and distributors that provide these services to the general and corporate customers all over the Takoradi and Ghana (Curnow 2010). This oil discovery will invite more businesses to come and join the supply chain network of energy producing companies of the country and help them in distributing the final oil products to the potential customers all over the country. The Ghanaian Government can also facilitate these new businesses by removing taxes and implementing relaxed business setup policies (Arthur, Otu, & Intsiful 2010).
The energy sector of Ghana will also see a significant increase in the level of competition among its top energy producing companies in both public and private sector (World Bank 2009). With this oil discovery, the supply of light oil has increased in the country which can facilitate the businesses that are operating in the energy production sector. The suppliers and distributors can also join this network and operate together for the economic development of the country (Paul 2007).
5. Industrial Sector:
In addition to the agriculture, energy, and services sector, the oil discovery in Ghana will also have great implications for the industrial sector. This sector consists of all those industries that produce finished products for the general consumers (Gelb 1988). They either manufacture these products from the very first step or make value addition to the ready-made products. In either case, the industrial sector has to depend upon energy resources as an input for their plants and machineries in the production units (Krapa 2010). The oil discovery in Ghana will not only facilitate this sector in the Takoradi city, but also to the industries in the whole country. The biggest benefit will be a considerable decrease in the energy prices which is one of the major costs of production for the industrial sector (Benin, Mogues, Cudjoe, & Randriamamonjy 2008).
6. Shift in the prices of Oil resources:
When Ghana will become self sufficient in its oil and energy sector, the energy producing companies will sell their products at lower prices to the general and corporate customer (Ndaba 2010). It will benefit the economy in different ways. For instance, when the prices of oil products will be lower, the manufacturing and industrial sector will have to bear lesser costs of production (Sudan Tribune 2009). At this point, this sector will have two options; it can either lower the prices of their products for the general customers and give them relief in their spending habits or increase its profit margins by keeping these prices stable (World Rainforest Movement 2009). However, the Government can intervene in their pricing policies and give ultimate benefit to the final consumers (Global Voice Online 2009).
Shift in the prices of alternative energy resources:
If Ghana fully utilizes the oil for local demand and exports the limited quantity to other countries, it can largely benefit its local communities through low energy prices (Hanns Seidel Foundation 2011). For example, if the Government decides to lower the price of light oil and related products, the consumption patterns of the general and corporate customers will also change in a very short period of time (Boohene 2011). All those industries which are dependent on alternative energy resources due to high oil prices will quickly shift to light oil (Yav 2007). Similarly, the general public will also start using oil products for their day-to-day consumption and may totally leave using other petroleum and gas products (Auty 1998).
Can this Oil Discovery be a curse for Ghana’s Economy?
While oil discovery in Ghana will improve the economic conditions and boost up the industrial sector, its negative consequences can also be a curse for the Ghanaian habitants. The very significant impact will be on the energy sector. The change in the consumption patterns of general and corporate consumers will directly hit the prices of alternative energy resources (Boateng, David, & Mieza 2010). The demand for these products will decrease in the local market while supply will remain the same. It will result in a significant shift of their prices to some lower level. Macro-Economists and analysts are of the view that the new oil discovery will negatively impact the alternative energy resources in the long run (World Bank 2009). It means the alternative energy producers may have to bear heavy losses for a long period of time (United Nations Environmental Programme 2009). The energy producing companies in the public sector may survive with the help of the Ghanaian government, but the small producers in the private sector will not have any means to survive from this recession. It may result in increased firing of employees, cutting or shutting down of operations, and a decrease in the demand for suppliers and distributors (United Nations Conference on Trade and Development 2007).
Secondly, a large number of analysts and economists argue that oil discovery has not shown favorable results in all the cases in the past (Aryeetey, Barthel, Loehr, & Ossei 2008). They are of the view that oil discovery may lead to greater level of corruption and inequitable distribution of resources at the Government level. The best way to protect Ghana from such curse is to ensure transparency and efficient utilization of resources at all Government levels (World Bank 2009).
The purpose of finding and critically analyzing this literature was to highlight the areas where the main research question for this proposal falls. It is clear from the above discussion that researchers have written a lot of material on this specific business issue but they have failed to support their arguments with specific examples from Ghana’s history or from similar cases with other economies of the world where oil have ever been discovered in the past. Therefore, the purpose of this research proposal is to contribute some unique research material to the existing literature by making research on both positive and negative implication of this oil discovery on Ghana’s economy.
1. Research Design:
For this specific research, the most effective research design would be to collect evidences from similar cases from the past, i.e. The positive and negative implication of oil discoveries which are officially reported and the steps which different economies took in response to these oil discoveries. For this purpose, it would be an effective technique to collect data from business professionals and economic experts that are associated with this field.
2. Data Collection:
As the research will be done from business professionals, economic experts, and analysts in the oil and energy sector, the best way to collect data is through focus group interviews. There are also other methods of data collection, but they may have certain drawbacks for this particular business issue. For example, if the researcher uses a questionnaire to collect data from these professionals, there are chances that they do not fill these questionnaires on time or totally refuse to respond to the questionnaire. On contrary, the focus group interviews will be based on face-to-face meetings with these professionals after taking appointments from them.
A major advantage of interviews is that the researcher can also ask some related questions which are not written in the question paper or even ask their personal opinion on any other related issue which may not be possible to ask in a structured questionnaire. The researcher will arrange his meetings with at least 50 professionals who will give their opinion on the economic implications of oil discovery in Ghana.
1. Time Scale:
The whole research will be carried out in a number of steps. First of all, the researcher will prepare a comprehensive list of all the potential respondents who can give their precious time for this research project. The research will contact all the respondents and request for an interview after explaining the research question, objectives, and the whole business issue. The maximum period within which the interviews should be competed is six months. After this period, the researcher will have to arrange the collected data and give it a concise form so that it can be analyzed in a more efficient and well-organized way. After data collection and arrangement, the researcher will analyze it using some suitable statistical tool or technique. This analysis phase may take one to two months. After analysis, the conclusion will be drawn which will be totally based on the responses given by the respondents and the results of the analysis.
In addition to the time resources, this research project will also need financial resources to make different expenditures like travelling, accommodation, and other daily necessities. It is because the researcher may have to travel to farther destinations to meet his required business professionals and analysts. It is also possible that he may not get positive response from some professionals which will further increase his expenditures when he will have to arrange meetings with more professionals in the comprehensive list.
Addu, A., 2011, Oil and Gas: A Boost to Ghana’s Economy, Available at [Accessed 15th September, 2012]
Arthur, K., Otu, Y., & Intsiful, P., 2010, Economic and Social Impact of the Emerging Ghana Oil Industry, Available at [Accessed 15th September, 2012]
Aryeetey, C., Barthel, M., Loehr C., & Ossei, R., 2008, Empirical Study on the Determinants and Pro-Development Impacts of Foreign Direct Investment in Ghana, Legon, Ghana: Institute of Statistical, Social and Economic Research
Auty, R., 1998, Resource Abundance and Economic Development, Oxford: Oxford University Press.
Benin, S., Mogues, G., Cudjoe and J. Randriamamonjy (2008), Reaching Middle Income Status in Ghana by 2015: Public Expenditures and Agricultural Growth, Discussion Paper No 811, Washington DC: International Food Policy Research Institute.
Boateng, C., David, B.A., & Mieza, K.E., 2010, Social and Political Stabilities: Recipes for Economic Growth in the Era of Ghana’s Oil Discovery, World Applied Sciences Journal, 11 (5): 582-585.
Boohene, R., 2011, Women, Livelihood and Oil and Gas Discovery in Ghana: An exploratory Study of Cape Three Points and Surrounding Communities, Journal of Sustainable Development, 4 (3): 185-191.
Curnow, R, 2010, Ghana’s oil discovery: blessing or curse? Available at [Accessed 15th September, 2012]
Gelb, A., 1988, Oil Windfalls: Blessing or Curse? Oxford: Oxford University Press.
Global Voice Online, 2009, Ghana: Who Will benefit From Oil? Available at [Accessed 15th September, 2012]
Hanns Seidel Foundation, 2011, the Impacts of the Oil Discovery in Ghana. Available at [Accessed 15th September, 2012]
Howard University, 2010, Economic and Social Impact of the Emerging Ghana Oil Industry. A SYMPOSIUM from April 29-30, 2010 at the Howard University Blackburn Center, Washington, D.C. Available at [Accessed 15th September, 2012]
Institute of Statistical, Social and Economic Research, 2012, Oil Find and Ghana Development, Available at [Accessed 15th September, 2012]
Korosec, K. 2009, Ghana’s Jubilee Field Keeps Getting Bigger, and the Bidding War Does Too. Available at [Accessed September 15th, 2012]
Krapa, H., 2010, the economic prospects of the oil discovery to the nation — Akufo-Addo. Available at [Accessed 15th September, 2012]
Management of Ghana National Petroleum Corporation, 2010, Status report on the jubilee field oil and gas development. Available at: [Accessed September 15th, 2012]
Ndaba, V. 2010, POLL-Oil flows may catapult Ghana to 14.7 growth in 2011, Available at [Accessed September 15th, 2012]
Paul, C., 2007, Managing Commodity Booms: Lessons of International Experience,” paper prepared for the African Economic Research Consortium, Centre for the Study of African Economies, Department of Economics, Oxford University.
Pyagbara, L.S. 2007, the Adverse Impacts of Oil Pollution on the Environment and Wellbeing of a Local Indigenous Community: The Experience of the Ogoni People of Nigeria. United Nations publication.
Sudan Tribune, 2009, South Sudan Villagers, Environment Suffer from Oil Boom. Available at [Accessed 15th September, 2012]
Tullow Ghana Ltd. 2009, Ghana Jubilee Field Phase 1 Development: Draft Non-Technical Executive Summary of Environmental Impact Statement, Available at [Accessed September 15th, 2012]
United Nations Environmental Programme, 2009, From Conflict to Peace building: the Role of Natural Resources and Environment. UNEP
United Nations Conference on Trade and Development, 2007, World Investment Report: Transnational Corporations, Extractive Industries and Development. Geneva: United Nations.
United States Non-Governmental Delegation Report, 1999, Oil for Nothing: Multinational Corporations, Environmental Destruction, Death and Impunity in the Niger Delta. Geneva: United Nations.
Vision Africa Gold Inter-nation Communication Limited, 2011, Ghana’s Economy and its Oil Discovery, Available at [Accessed 15th September, 2012]
Walters, D., 2010, Ghana and the discovery of oil: Will Ghana escape the black gold curse? Available at [Accessed 15th September, 2012]
World Bank, 2009, Economy-Wide Impact of Oil Discovery in Ghana, Report No. 47321-GH.
World Rainforest Movement, 2009, Philippines: Oil and Gas bringing misery and destruction in mangrove region. Monthly Bulletin of the World Rainforest Movement
Yav, J. 2007, The Curse of Oil in the Great Lakes of Africa. Available at [Accessed 15th September, 2012]
APPENDIX 1: FOCUS GROUP/INTERVIEW QUESTIONS
The Purpose of the Interview Questions:
This interview will aim to get an independent opinion from each respondent in an organized and pre-ordered fashion. However, the questions will be totally open-ended where the respondents will only give their personal opinion without asking the limitations of required answers. While conducting interviews with the respondents at their place or at a focus group panel at a common place (whatever the case may be), the researcher will keep in mind the research objectives and limitations of the study. The purpose of these questions will not be to get opinion from the respondents against any political party or governmental bodies on this particular issue; rather it will aim to get answers of the pre-decided questions in an unbiased manner.
The researcher can ask the following questions from the respondents:
1. How the oil discovery will affect the Ghanaian economy in a positive or negative way?
2. What steps the Ghana Government can take to ensure the maximum benefits for the economy from this oil discovery?
3. How negative consequences of this oil discovery can be eliminated, mitigated, or at least minimized?
4. How the Government can boost up the other sectors (specifically the Agriculture, manufacturing, industrial, and services sector) with the growth of its oil and gas sector.
5. What steps can be taken in order to remove the evil of corruption, improper resource management, and inefficient policies from all the Government levels so that the new oil discovery can significantly contribute towards the country’s economic development?