ABSTRACT
Oil discovery has been of economic benefit to most developed countries while it has brought curse to the economies of most developing countries. The difference, upon investigation in this thesis, was of the managerial principles adopted among these two categories of countries. The generally acclaimed managerial principles of oil wealth are investigated in these crucial areas: Macroeconomic, which was made up of fiscal management and exchange rate policy; second, ensuring fairness and equity in oil wealth distribution, that is dealing with inequalities that occur mostly in oil-rich nations; third, Dealing with multinational oil companies, which comprises of the type of auction design and bidder preference; fourth, Oil management laws, which also include setting account for oil revenue, transparency, accountability and, oversight and control of oil revenue.
When these key principles are ignored, oil-rich country could suffer from environmental destructions, Dutch disease syndrome (shrinking other sectors of the economy), poverty, inequalities and unemployment, ineffective rule of law, attitude of rent-seeking, greater risk of conflicts and war, and nondemocratic state.
In the context of Ghana’s current economic status, certain key managerial principles are drawn from the generally accepted principles and also the experience of other resource-rich countries. There are two major macroeconomic challenges that Ghana faces. First, is how to deal with the characteristic frequently changing oil price and the volatility of its output and Second, is its recurrent fiscal imbalance. The former could be resolved through manipulating the oil revenue share to be deposited into the national budget and making investment with the remainder overseas. By establishing a permanent fund, where only the interest on that fund is transferred to the budget is necessary to deal with the latter problem.
Ghana also needs structural transformation. Agricultural productivity growth and diversification of the economy away from oil production. It means the country’s agricultural sector which accounts for greater percentage of its workforce should be strengthened and value-addition to the primary products which means heavy industrialization. However, Ghana should invest massively on public and merit goods which in turn will promote growth in the sectors mentioned above. The famous Dutch disease is of no essence if oil revenue is invested in public goods rather than consumption.
Good governance, transparency and accountability are of greater essence to Ghana in the proper management of its oil wealth. Drawing from Ghana’s experience with the mining industry, there was lack of transparency and favourable laws that served as incentives for rent-seeking behavior. Laws that mandate independent bodies to oversee the management of the oil rents and the public disclosure of information concerning all oil dealings among the oil companies and the government are paramount to the effective management of the oil rent. Ghana should also make its compliance to the EITI mandatory to help solve the transparency problem that has bedeviled its mining industry.
Lastly, environmental concerns are of equal greater importance to Ghana‟s economic growth. There should be environmental laws that would ensure that multinational oil companies comply with environmental regulations to prevent a major disaster to the environment.
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