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Renegotiate oil deals, Nigeria and Botswana earning 51%, 65% – IFS

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The Institute of Fiscal Studies (IFS) is not happy Ghana is earning only 17% from oil deals and thus called on government to renegotiate all agreements involving Ghana’s oil sector.

The organization has also suggested to government to go beyond the oil agreements and reconsider all the agreements in the extractive sector as well.

IFS in its latest report, identified what it called poor negotiation as the reason Ghana is losing so mich in the area of revenue generation.

Research Fellow at the IFS Dr. Adu Owusu Sarkodie who was speaking at a forum on Ghana’s domestic revenue mobilization mode, on August 31, 2021, explained that if the country will not lose much in renegotiating with its partners in the oil sector, then the time to do that is now.

 “We have to try and renegotiate your oil deals if they’re not going to cost us too much.”

Dr. Sarkodie continued that “If we cannot renegotiate, then we have to forget about it and look into the new discoveries. We are not part of the production process in our extractive sector. We are only taking royalties.”

In comparing Ghana to some African countries in the sub-region, Dr. Sarkodie noted that the country’s earning in the sector is inadequate as compare to countries like Nigeria which is earning around 51% while Botswana is getting in the region of 65%.

Comparing Ghana’s revenue from oil with Nigeria, this is the value of production, 2.2 billion in 2015 increasing to 4.8 billion in 2018. The revenue government of Ghana earned, from 400 million drops, and increase to 986 million. On average, while Ghana produced 2.95 billion, Ghana earned 548 million on average representing only 17.9%.”

Again he said “in Nigeria, they produce 54.6 billion worth of extractive resources, only 0.3% came from minerals, 99.7 came from oil. So, Nigeria does not produce so much minerals.”

Botswana produced 4.0 billion worth of extractive resources and all came from minerals. But you can see, Ghana produced 11.1 billion compared to Botswana, in order words, the value of oil produced in Ghana on average, Ghana made an average of 17.9%. Let’s look at Nigeria, average from 2015 to 2018, Nigeria produced 43.7 billion but earned 22.8 billion on average.”

51.6% average as the revenue the government of Nigeria earned from oil. Nigeria earned so much not because it produced so much oil but also because it gets much bigger portion of the oil produced as its revenue. While it got about 52%, Ghana got only about 18%”, he lamented.

He thus cautioned that cost consideration should not be the reason for the government of Ghana to settle for such a low ratio when it gets to the negotiation table.

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