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Views from the Center


plowingaheadPresident Obama's first visit to Africa will be to Ghana. This is no surprise: Ghana is a close U.S. ally and has been in many ways a model of both political and economic reform. Its track record over the last twenty years: five successive democratic elections, two peaceful transitions of power between parties, sustained high rates of economic growth, and a healthy reduction in poverty rates.

Ghana's future forecast has recently become a little murkier, however. A consortium of prospectors found oil off its coastline in the summer of 2007, and expectations are that real pumping will begin next year. The IMF projects that the government could be earning up to $1.3 billion per year from black gold by 2013. Sounds like a wonderful windfall for a country doing many of the right things already.

But the record on oil is more of a cause for worry than celebration. Nigeria seems to have little to show for the

$231 billion it has earned from oil since 1970. Instead, the country has become synonymous with corruption and Nigerians are actually poorer today than they were forty years ago. One plausible reason for this paradox: when a government gets a large part of its revenue from natural resource “rents” that it doesn’t do anything to earn, accountability to its citizens weakens. The normal bargain of paying taxes in exchange for services evaporates and citizens no longer expect (or demand) much from the public officials. This may be why oil is also associated with a whole host of social “bads” like corruption, poor macroeconomic management, bad governance, conflict, and poverty (See the seminal works from Alan Gelb and Terry Karl).

Ghana’s oil does not necessarily have to mean the end of its good run. Norway, Botswana, and other countries have found ways to avoid the natural resources curse. Ghana itself has done a pretty good job managing revenue from its gold mines and it is an active member of the Extractive Industries Transparency Initiative. The trick for Ghana will be to find a way to both shed light on its oil sector and strengthen the incentives for people to hold their government accountable. Colleagues and I are working on just such a proposal. Watch this space.


CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.