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Ghana is ‘about to have an oil boom’

Mar 29 , 2018

Ghana’s economy is seen expanding by 8.3 percent this year, making it one of the world’s fastest growing. The rapid growth is due to new oil coming online. Meanwhile Ghana’s cocoa industry, for which it is world famous, could face headwinds due to climate change and urbanization. Ludovic Marin | AFP | Getty Images

French President Emmanuel Macron (2nd R) and Ghanaian President Nana Akufo-Addo in Accra, Ghana, on November 30, 2017.

Ghana, the west African nation known as one of the world’s largest cocoa producers, is on course for skyrocketing economic growth this year thanks to an entirely different commodity.

Ghana is “about to have an oil boom,” Imad Mesdoua, senior consultant for Africa at Control Risks, told CNBC via telephone.

“This will primarily be driven by rising oil prices, expanding production and new deals which are likely to come online in the coming six months,” Mesdoua explained.

The U.K.’s Tullow Oil and Italy’s Eni have both expanded their operations in the former British colony in recent years. Tullow started a multiyear drilling program on TEN, its second field in Ghana, in February of this year, having pumped its first oil from the site in 2016. Eni, meanwhile, began production on its Sankofa field in mid-2017.

Earlier in March, Ghana’s President Nana Akufo-Addo announced that the country’s economy was set to grow by 8.3 percent in 2018, above the 6.8 percent initially estimated in its annual budget. The figure is demonstrative of a significant economic uptick, given that the annual growth figure for two years earlier was just 3.6 percent according to Akufo-Addo, as reported by Reuters.

Simone Kuhlmey | Pacific Press | LightRocket via Getty Images

Ghanaian President Nana Akufo-Addo at a press conference in the Federal Chancellery, Berlin, Germany, on February 28, 2018.

Ghana’s anticipated growth falls well above the World Bank’s average for the African continent. This was calculated at 3.2 percent for 2018, as released in January of this year.

Despite the impressive figures, Philip Walker, Ghana analyst at Economist Intelligence Unit, added the caveat that the non-oil segment of Ghana’s economy was seeing a “decent level of growth but not spectacular.”

Gold was Ghana’s top export product in 2016, according to the Observatory of Economic Complexity, accounting for 42 percent of the total. This was followed by cocoa, at 18 percent and then crude oil, at 9.1 percent.

Political promise

Ghana’s positive economic news is supported by the country’s political backdrop.

Akufo-Addo was elected in December 2016 on an economic agenda which includes cutting corporate taxes, fighting corruption and formalizing the economy.

Melanie Stetson Freeman | The Christian Science Monitor | Getty Images

Farmers extract cocoa beans from the fruit on November 11, 2015, in Akyekyere, Ghana.

Mesdoua described Akufo-Addo’s “eagerness to diversify the economy” and “intent to modernize policy making.”

But despite the promising growth prospects, Ghana remains a lower middle income country. Its gross domestic product per head was $1,610 last year, according to the International Monetary Fund, below the emerging market average of $4,960.

“Ghana’s democracy is a benefit to its economy,” Walker said, but explained that “Ghana has had strong growth in the past but that hasn’t translated [...]