Assessing the Economic Impact of Oil and Gas Production on Ghana's Economy

Abstract

Since the discovery of oil in the offshore coast of Ghana in 2007, the nation has had increased expectations on possible accelerated economic growth and development. This oil and gas if managed well has the possibility to transform a structurally week economy into a self-sustain economy. Likewise, if not well managed can lead to social, economic and political instability as it can be seen in some oil rich countries where their economies are characterized by corruption, poverty and conflict.The aim of this study was to find out the economic impact of oil and gas production on Ghana’s economy. The research employed the analysis of secondary data from the World Development Indicators, World Bank. Data were processed and analysed using SPSS statistical software. Simple linear regression analysis was performed to analyse the impact of oil rents on Ghana’s economy.The study revealed that revenue accruing from oil rents affect GDP growth positively and therefore considered impactful on Ghana’s economy since it represents net addition to capital stock. Averagely, Ghana has been experiencing GDP growth of 6.1% per annum with average contribution of oil rent being 1.8% per annum (2000-2018). The regression analysis shows that a percentage increase in oil rents will lead to a corresponding increase in GDP growth by 0.788 % per annum, which is approximately 1% per annum. It was also revealed that there has been a paradigm shift in Ghana’s economy from an agrarian to a more industrialised and service oriented economy with gradual increase in oil discoveries since 2011.

Keywords: Oil and Gas production; Economy; Capital Accumulation; Oil rents; Ghana

DOI: 10.7176/JESD/12-14-08

Publication date:July 31^st 2021