The African Center for Energy Policy (ACEP) has opposed calls for Ghana to hedge its oil against global price fluctuations. According to the Executive Director of ACEP, Benjamin Boakye, the move will rather be injurious to the country’s economy in the long run. He rather advocated that the Bank of Ghana and Ministry of Finance work to develop the Stabilisation Fund to serve as back up to shore up the fall in oil revenue following the declining global oil prices.
“We have the stabilization fund which is supposed to do so when there is that significant shortfall in the projected receipts. But we haven’t done well in building that fund to ensure that there is enough buffer that can be able to offset any fall in crude oil prices and that is how come when oil prices drop significantly we are not able to smoothen our budget,” he remarked. The Public Interest and Accountability Committee (PIAC) in its 2016 Annual Report warned of massive economic losses should the Bank of Ghana and the Finance Ministry fail to hedge the country’s oil reserves.
According to PIAC, Tullow and Kosmos both received about 60 and 48 percent more in oil revenue after hedging their produce last year. The relative benefits however came at a time that the Ghana National Petroleum Corporation (GNPC) realized higher prices for its oil compared to the other Jubilee Partners in 2016. Meanwhile PIAC wants the GNPC to undertake insurance policies which will serve as cover to protect the country’s revenue from the oil fields in the event of declining global prices as well as until such a time that the faulty turret bearing on the FPSO Kwame Nkrumah.
Benjamin Boakye also maintains that the government should be able to fine tune its budget should enough revenue be channeled to cushion against shocks posed by price volatilities on the global oil market. “Going forward I think what we need to do is to have the fund built up such that when we have a shortfall, we can rely on that rather than hedging which could also come back to hurt us at some point…For example if we had even hedged in 2016, nobody would have hedged a 100 dollars today for you to be able to say that you are protecting a certain price,” he added.
By: Pius Amihere Eduku/citibusinessnews.com/Ghana