Oil and Gas Production and the Growth of Ghana’s Economy: An Initial Assessment

Abstract

Oil and gas resources present enormous opportunities for the economic development of low income economies, but poor management of these resources can result in dire consequences for the foundations of the resource-endowed nation. The discovery of oil and gas in Ghana is as significant as the policies and measures to ensure optimum benefits to the nation. This paper evaluates the sustainability of petroleum production in the light of the medium term policy structure, the Ghana Shared Growth and Development Agenda (GSGDA). In particular, the economic contribution of oil and gas to Ghana’s GDP and sustainable investment options for petroleum revenues were examined using ordinary least squares (OLS) regression. The evidence suggests that at current production levels, petroleum is not a significant contributor to Ghana’s GDP after adjusting for the contribution from other sectors of the economy. The consistent appreciation of Ghana’s real effective exchange rate between 2010 and 2013 led to a deterioration of the competitiveness of the non-oil sector and declining contribution of the agricultural sector to GDP; and further eroded the net impact of petroleum production. Investing petroleum proceeds in the non-oil sector and expansion of the export base are a viable option for utilising petroleum revenues.