Focus on Ghana’s handling oil revenue

Ghana’s Petroleum Revenue Management Act was passed more than a year after the first oil was pumped from the country’s Jubilee Field. The law outlines clear mechanisms for collecting and distributing petroleum revenue. It specifies what percentage should help fund the annual budget, what should be set aside for future generations and what should be invested for a rainy day.

Petroleum revenue contributed 4 per cent of the government’s total capital spending in 2011. The funds went mainly to investments in road infrastructure, but also to building the capacity of the oil and gas sector, repaying loans and strengthening agriculture, most notably for fertilizer subsidies.

In devising its law, Ghana borrowed from best practices in Norway, Timor- Leste and Trinidad and Tobago, which have developed laws to better govern oil and gas exploration and production, and to manage the revenues. 

Implementation challenges

There have been issues around the implementation of the Petroleum Revenue Management Act. Civil Society Organizations (CSOs) in Ghana have appealed to the government to publish the draft regulation on the Petroleum Revenue Management Act to ensure efficient and effective utilisation of the petroleum revenue.

This followed operational and administrative difficulties in the implementation of the Petroleum Revenue Act. Act 815 passed in 2011.

There have also been calls by other stakeholders for amendments of the Petroleum Revenue Management Act to allow the country invest the petroleum funds locally to boost its economic development adding that the economic rationale for investing the country’s oil revenue in a foreign instrument has not been properly established.

As of now, the Petroleum Revenue Management Act 815 provides a legal framework for the collection, allocation and management of petroleum revenue in a responsible, transparent, accountable and sustainable manner for the benefit of Ghanaians, in accordance with Article 36 of the 1992 Constitution. It was enacted in 2011.

Proposals for investing the Petroleum Funds, comprising Stabilisation and Heritage Funds, have raised divergent views from civil society groups and government.

The Act stipulates that not less than 90 percent of the amount in Stabilisation Fund shall be invested in qualifying instruments such as debt instruments, convertible currency deposits, or securities issued or guaranteed by the World Bank, International Bank for Settlement, The European Central Bank or the Central Banks of other sovereign countries with graded security.

More so, not less than 80 percent of the amount in Heritage Fund shall be invested in qualifying instruments and not more than 20 percent of the Heritage Fund shall be invested locally in strategic sectors on the basis of commercial needs. 

Frank Uzuegbunam