The Multi-Stakeholder Group of the Ghana Extractive Industries Transparency Initiative (GHEITI) has recommended that government refrain from diverting oil revenue allocations to finance the proposed “Big Push” infrastructure projects.

The Group, therefore, called for ring-fencing of such funds to ensure optimisation of the use of the Annual Budget Funding Amount (ABFA) to accelerate road infrastructure development and improve national connectivity.

Such move would also enable the Public Interest and Accountability Committee (PIAC) to report to its stakeholders on the use of petroleum revenues, thereby, enhancing transparency and accountability.

The recommendation comes as the government initiates a review of the Petroleum Revenue Management Act (PRMA), 2011 (Act 815), to increase the allocation of oil revenues to finance the Big Push infrastructure initiative.

With an estimated housing deficit of over two million units and 57 per cent of urban roads classified as poor, the government’s US$10 billion Big Push infrastructure initiative is aimed at addressing those challenges, as well as improvements in water and sanitation and reducing youth unemployment.

The Group’s call for ring-fencing also comes on the backdrop of production declines and reduced revenues in 2023, where crude oil production fell by 6.7 per cent, resulting in a 25.65 per cent drop in petroleum revenues to USD1.062 billion.

The decline was attributed to weakened performance as the Jubilee, Tweneboa, Enyenra, and Ntomme (TEN), and Sankofa-Gye Nyame (SGN) fields matured, leading to the sector’s contribution to total government revenue also falling to 9.35 per cent.

Already, the Ghana National Petroleum Corporation (GNPC) and its subsidiary Explorco did not pay corporate income tax on revenues from their seven per cent interest in Jubilee and TEN since 2021, largely due to non-adherence to ring-fencing provisions.

Fadil Iddi of the EITI Secretariat, presenting the report on the oil and gas sector said the shift in revenue allocation to the Big Push initiative would enhance maximisation of the share of petroleum revenue to tangible physical projects.

However, he urged the Minister of Finance to avoid spreading the petroleum-funded component of the Big Push ‘too thin’ to minimise its impact, cautioning against activities that would make the visibility of projects backed by petroleum revenues unclear.

“It is recommended that, the Minister of Finance ring-fenced projects being financed with oil revenues under the Big Push to enable PIAC report to its stakeholders on the use of petroleum

revenues. Co-mingling funds will obscure the visibility of projects funded by petroleum revenues,” said, Iddi.

Dr John Abdulai Jinapor, the Minister of Energy and Green Transition, in a speech read on his behalf, disclosed that the government had taken steps to address challenges in the sector, including securing a US$3.5bn revitalisation investment.

He said a Memorandum of Understanding (MoU) had been signed with the Jubilee/TEN and Offshore Cape Three Points (OCTP) partners, noting that those investments were part of a comprehensive strategy to address declining oil production, expand reserves, and restore investor confidence in the sector.

He noted that ongoing reforms, including resolving gas aggregator challenges and enhancing regulatory certainty, had attracted renewed interest from major international oil companies, which would sustain the sector’s contribution to the national economy.

Patrick Nomo, the Chief Director, Ministry of Finance, and EITI Co-Chair, noted that extractive activities provided GHS1.8 billion for local development and infrastructure projects and contributed approximately GHS16.7 billion to domestic revenue in 2023.

The contributions, including corporate income taxes, royalties, and dividends from oil and mining sectors also accounted for about seven per cent of total government revenues and a net foreign exchange inflow of US3.9bn.

Nomo said these developments underscored the sector’s invaluable support to national economic and fiscal management, urging stakeholders to help strengthen governance frameworks and the provision of reliable data to guide policy decisions.

“For the Ministry of Finance, these reports are not near disposes. They are essential tools for fiscal forecasting, budgeting, planning and national economic management,” the Chief Director said.

Understanding Ghana's stock market and how to invest | BizTech