n AfricaGrowth Agenda - Sovereign wealth funds and oil discovery : lessons for Ghana, an emerging oil exporter

Volume 2012, Issue 10
  • ISSN : 1811-5187


On Dec 15 2010, Ghana officially became an oil exporting nation. The antecedents to this however started much earlier, culminating in the discovery of crude oil in commercial quantities off Cape Three Point in July 2007. It is estimated that Ghana will become the seventh largest oil producer in Africa, with initial deposits of around 3 billion barrels. About 60,000 barrels of oil was estimated to be exported per day in 2010, 120,000 barrels a day from 2011, fetching the country $836 million annually and over $20 billion over the production period 2012-2030 (see Obeng-Odoom, 2009). The oil find has raised expectations and hopes of a 'better Ghana' where jobs would be created and the state of the economy improved for all and sundry. However, this depends to a very large extent on whether Ghana is able to avoid the natural resource curse typified by bad management and corruption, exchange rate volatility and crowding out of private investments. In this article, we propose sovereign wealth funds as one channel of managing the incoming oil revenues. We argue that, properly run and regulated, an oil fund, Economic Stability Account for Ghana (ESAG), will serve as a buffer in stormy times, generate returns for the repair of non-existent and run down infrastructure, provide liquidity to lubricate the wheels of the financial system when lending channels dry up and deepen investor confidence in the maintenance of the Ghanaian economy.

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