The New Oil Sector and the Dutch Disease: the Case of Ghana (original) (raw)
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Science Archive, 2022
The overdependence on crude oil has produced susceptivity to every part of the Nigerian Gross Domestic Growth (GDP) and there was the need to examine the effect of crude oil on the economy of Nigeria. This study, therefore, investigates the long-run effect between oil revenue, oil price volatility, and economic growth in Nigeria. The data on oil revenue, non-oil revenue, oil price volatility, and per-capita income from the year 2006to 2020 extracted from the Central Bank of Nigeria (CBN) Statistical Bulletin was applied in this research work. The research applied Descriptive Statistics, Augmented Dickey-Fuller Unit Root test, Johansen cointegration, and Autoregressive Distributed Lag (ARDL) co-integration statistical method to examine the long-run effects of crude oil production on Nigeria's economy. It was discovered from our result that; oil revenue plays a remarkable role in Nigeria's economy by its advancement of the country's GDP. Furthermore, Nigeria has regulated oil revenue to accomplish economic growth in numerous ways. The study recommended that the Nigerian Government should diversify its export supply through downstream production and encouragement of more private sector participation.
American Journal of Economics, 2017
The paper examines the impact of both oil and non-oil foreign direct investment (FDI) on economic growth in Nigeria for the period 1980. The paper employed ARDL Approach to Cointegration and conditional EC Model in order to ascertain the long run and short-run relationships between the two categories of FDI (oil and non-oil), investment, export and economic growth. Bound cointegration test established that there is long run equilibrium relationship among the variables. Evidence from short run and long run elasticities shows that while non-oil FDI has positive effect on the growth of GDP, oil FDI exerts a negative effect on the economy and this may be due to the high profit repatriation and low level of domestic employment in the subsector. The result further shows that domestic investment has significant positive effect on economic growth, the coefficient of export is also positive although insignificant. In this study, we show that economic growth in Nigeria is largely propel by in...
Oil Price and Real Exchange Rate Appreciation: Is there Dutch Disease in Nigeria?
SSRN Electronic Journal, 2020
Nigeria has witnessed oil windfalls for decades, however, it was presumed that revenues from oil would assist Nigeria to mark its transition from underdevelopment to industrial development. Regrettably, the high dependence on oil sector has led to deindustrialization and exchange rate appreciation. This paper studies the dynamic relationship between oil price and real exchange rate for Nigeria using annual time series data over the sample period 1970 to 2018. Our analysis is based on Autoregressive distributed lag bound testing to cointegration approach. Following the integration and cointegration tests, the results indicate that all the variables attained long run cointegrating relationship. The results also indicate that oil price, government expenditure and inflation contributes to real exchange rate appreciation, thus, confirming the existence of Dutch disease. Essentially, this is a clear evidence that Dutch disease weakens the competitiveness of the lagging sectors in Nigeria. Also, the paper identifies unidirectional causality from oil price to real exchange rate, and bidirectional causality between oil price and government expenditure, real exchange rate and inflation. This means that the oil price and inflation encourages real exchange rate appreciation. Consequently, the policy implication is to diversify the lagging sectors by investing in human resource development, basic infrastructure and tax concessions will raise the competitiveness level of the lagging sectors.
Oil Prices and Economic Growth Nexus in Ghana: New Empirical Evidence
Journal of Economics and Management, 2023
The study aims to contribute to the oil price-economic growth nexus in Ghana by assessing the short-and long-run relationships with annual data that covers the period from 1987 to 2020. The study contributes to the literature by accounting for developments in the Ghanaian oil industry post-2012, including the discovery of the Tweneboa-Enyenra-Ntomme (TEN) and Sankofa Gye-Nyame (SGN) oil fields in 2016 and 2017, respectively, thus filling a massive deficiency in the literature. The Autoregressive Distributed Lag (ARDL) and the bounds cointegration test are used because they are appropriate for analyzing short-and long-run dynamics on a theoretical basis when time series are mixed-integrated, i.e., I(1) and I(0). The bounds test results indicated a cointegration relation between economic growth as proxied by real gross domestic product per capita and physical capital, labor force, oil prices, population growth, and government expenditure. The findings provide convincing evidence that the oil price is a significant driver of economic growth in Ghana. Both long-run and short-run impacts of the oil price are positive, statistically significant, and robust for the oil price proxy. The results suggest that because of the recent volatility of oil prices, economic policies should be concentrated on reducing overreliance on oil revenue to avoid the Dutch disease phenomenon. Nonetheless, policymakers should strategize well enough by encouraging more local participation in the oil sector to avoid the risk of falling victim to the Dutch disease.
Crude Oil Export of Ghana and Its Impact on the Economy
Annals of the Polish Association of Agricultural and Agribusiness Economists, 2019
The aim of the paper is to illustrate the impact of crude oil commercial production and export launch in Ghana on the country’s economy. The study is conducted based on one factor variance analysis and Tukey’s Honest Significant Difference test. Analysis is related to the Dutch disease paradox. Ghana constitutes an eminent and interesting example of a natural resource-rich country, where oil commercial production started late, in 2011. Monetary policy in Ghana seems to be effective in mitigating the effects of the Dutch disease. Research results imply that the Ghanaian Cedi depreciated rather than appreciated since crude oil export’s launch. Moreover, it is shown that the increase in oil export has not had a significant impact on the export of non-fuel goods. Additionally, the study shows that the launch of oil commercial production was associated with a contraction of agricultural value added. The rise in oil export led to a significant decrease of the rural population share in the...
Empirical analysis of crude oil consumption and price on Ghana’s economic growth
Open Science Journal
The objective of this paper was to investigate the impact of crude oil consumption and oil price on the growth of the Ghanaian economy. It proceeded with annual time series data (1980-2016) sourced from World Development Indicator (WDI) and Energy Information Administration (EIA). All variables used in the study were integrated of order one as suggested by the Augmented Dickey-Fuller (ADF) test. Further, the Johansen Cointegration test suggested the existence of cointegration among the variables. The study used the OLS estimation procedure.The study found a positive and statistically significant relationship between oil price and economic growth in the long run. On the other hand, an inverse relationship was found between crude oil consumption and economic growth in the long run.Based on the findings the study recommends that the government diversify the economy to reduce the shock the economy might experience in times of oil price shocks. Further, risk management instruments like p...
CRUDE OIL PRICE AND GROWTH OF OUTPUT: THE CASE OF GHANA
Ghanaian economy vulnerable to fluctuations in the world price of crude oil, especially when the country still depends largely on imported crude oil to meet her crude oil needs. This study therefore employed the ARDL approach to cointegration to examine the relationship between crude oil price and Ghana's economic growth using annual data set from 1967 to 2012. Unlike previous studies on crude oil price economic growth relationship for Ghana, this study controlled for the effect of fiscal policy in the relationship. This study adopts the neoclassical growth model of Solow. The results of the study indicated the existence of a long run relationship between crude oil price and economic growth in Ghana. Also, the study revealed that oil price increases had a negative impact on economic growth in both the short run and long run and this was reinforced by increases in government expenditure in response to the oil price in the form of fuel subsidies. The policy implications of the study are that fuel subsidies should be removed and the country should consider alternative sources of energy which are cheaper relative to crude oil price.
Impact of Oil Resource Abundance on Nigerian Economy: 1980 – 2018
FUDMA JOURNAL OF MANAGEMENT SCIENCES, 2021
This study investigates impact of oil resource abundance on Nigerian economy. To achieve the objective of the study, annual data covering a period of 1980-2018 was collected from the Central Bank of Nigeria (CBN) and World Bank Development Indicators (WDI). Oil production is used as a proxy of oil resource abundance. While exchange rate and inflation rate were used as control variables. The data were analysed using the Autoregressive Distributed Lag (ARDL) Model. Findings from the study show that oil resource abundance has a positive impact of 6.9 per cent and 2.2 percent on the Nigerian economy both in the long-run and in the short-run respectively. The result further reveals that inflation has adverse effect of-0.9.2 per cent on Nigeria economy in the long-run but a positive impact of 1.0 per cent on RGDP in the shortrun. However, the impact of exchange rate on Nigerian economy was positive both in the long-run and in the short-run. Based on the findings the study concludes that oil resource abundance is a favour rather than a course to the Nigerian economy. The study recommends that government should stabilized funds from oil resource endowment so as to ensure sustainable economic growth and avoid rent seeking and corruption.
OBED ARYEE DUTCH DISEASE EFFECTS OF OIL DISCOVERY IN GHANA
ANALYZING THE DUTCH DISEASE EFFECTS OF THE OIL DISCOVERY IN GHANA
It is usually claimed that countries that discover abundant natural resources (especially oil and gas) are likely to suffer from Dutch Disease (a kind of Natural Resource Curse). The symptoms of the Dutch Disease are often shown when a country’s currency appreciates and its traditional export sectors (agricultural and manufacturing sectors) become less competitive. The less competitiveness of the traditional export sectors eventually causes structural changes in the economy by reducing output and employment and increasing the general price level. This paper studied possible occurrence of Dutch Disease through four main transmission channels: currency appreciation effect, spending effect, resource movement effect and saving, investment and physical capital effect. The paper further investigates that corruption, conflict and political instability, mismanagement of oil revenues, over dependent on natural resources as primary exports and oil price fluctuations are likely factors that can cause oil curse in oil-rich nations. It is asserted that Ghana may be a victim of the Dutch Disease as a result of its recently discovered oil. Therefore, it is the aim of this paper to analyze whether Ghana could be affected by the Dutch Disease through either currency appreciation effect, spending effect or the resource movement effect by examining the impact of the expected oil revenue inflows on Ghana’s exchange rate, agricultural output and its inflation. Since the oil revenue is yet to come in the future, the paper adopts an ex post study approach by using export earnings of gold as a proxy for the expected oil revenue inflows in the various tests. This paper uses Multiple Linear Regression (MLR) analysis to show that the Dutch Disease is less likely to occur in Ghana. The paper discovered that the expected oil revenue inflows would rather cause the Ghana cedi to depreciate rather than to appreciate. Again, the paper discovered that the expected oil revenue inflows would have an insignificant negative impact on agricultural output and inflation. Finally, the paper ends with policy recommendations such as using managed float to control the exchange rate, choosing monetary policies that are consistent with fiscal policies to stabilize the economy, diversifying the economy away from natural resource-based exports into a more income enhancing export products, and mapping out strategies to curtail corruption.
Nigerian oil and exchange rates: Indicators of 'Dutch disease
Development and Change, 1990
This article assesses the impact of expanding oil revenues on non-oil sectors of the Nigerian economy from 1960 to 1985/6. Emphasis is placed on the effects of exchange rate appreciation during the 1970s on the agricultural, manufacturing and non-traded goods sectors. The analysis is conducted within a Dutch disease context. Two main conclusions are that the decline of Nigerian agriculture during these years can be attributed to a combination of low real producer prices and insufficient government investment, as well as the overvalued Nigerian naira; and that the high real exchange rate may have benefited the manufacturing sector.