'Big Men' shows Nigerian shadow over Ghana's oil

Oil discoveries should bring prosperity. Yet new producer Ghana is haunted by the oil-fueled problems of nearby Nigeria.

When the American oil company Kosmos Energy came to Ghana for the first time in 2005, no one quite knew how things would shake out. The West African nation was not an oil producer, and potential reserves lay deep underwater off the coast.

“It was a huge risk to search in a country that never had oil,” one of the company’s managers, James Musselman says in a new documentary “Big Men.”

But Kosmos hit the jackpot, discovering the 1.8 billion barrel Jubilee field in 2007. Production began in 2010, and that same year, then President John Kufuor announced enthusiastically, “With oil as a shot in the arm, we’re going to fly.”

Yet Nigeria, just a few hundred miles away from the Jubilee field, once stood where Ghana does now. And instead of prosperity, oil has fuelled Nigeria corruption, environmental degradation and long-running insurgencies. “Big Men” examines whether Ghana could suffer the same curse that has made Nigeria synonymous with economic dysfunction despite massive oil wealth.

The Nigerian warning

Since oil was first discovered in Nigeria five decades ago, life for Nigerians has generally grown worse. Corruption, environmental pollution and rebel activities overshadowedthe oil boom in the Niger Delta. The money made from oil has never reached the Nigerian population as promised.

To make matters worse, militant rebel groups, such as the “Deadly Underdogs,” have taken to sabotaging oil wells in the Niger Delta in an effort to stop the flow of profits to large multinationals and a select few in government. Some of these militant groups have even diverted oil from pipelines in the Delta’s creeks for their own collection, a practice known as “oil bunkering.”

By 2011, an estimated 7 percent of Nigeria’s crude production was being stolen. Further, attacks on oil installations slashed Nigeria’s production by about 1 million barrels a day. Rebels in the Delta say they are fighting for local communities left out of the oil boom. “Everybody is unto himself and wants to survive,” one Nigerian insurgent says in the documentary.

Even as much of Nigeria has remained poor, oil has helped a small elite grow wealthy. “You are a big man if you have money, earned legally or illegally,” a Nigerian man explains in “Big Men.” “And everybody wants to become big.”

Ghana’s efforts

Kosmos Energy estimates oil reserves in the Jubilee field are worth between $4 billion to $5 billion. How much of that will benefit the Ghanaian population remains unknown. Nevertheless, the country has attempted to avoid the same mistakes as Nigeria. After Kufuor’s government left office in 2009, a new government under former president John Atta Mills and his successor, John Mahama, has tried to alter the initial contract with Kosmos—which they felt disproportionately benefited the Texas firm and its foreign partners. Kosmos, in turn, pressured Ghana to honor its contract with the firm.

When the oil began to flow, the World Bank proposed a set of actions that would result in an effective use of oil revenue for the Ghanaian population. Those actions included transparency in revenue usage, fiscal sustainability and stabilization mechanisms for managing oil price volatility. Most proposals, however, were never put into action.

As for existing laws on the distribution of oil revenues, critics doubt that Ghanaian government has complied. While laws that determine the amount and sources of Ghanaian government expenditure do exist, the reality is that oil revenue has not reached its intended targets. Indeed, between 2010 and 2012 income per capita increased from $1,260 to $1,547—growth that was no better than that of the average of sub-Saharan Africa.

But there ishope for improvement. Compared to Nigeria, Libya and other major African oil producers, Ghana is considered a politically stable country with less government corruption. It is ranked 63 in Transparency Internationalls 2013 corruption index, compared to Nigeria’s rank of 144. Ten years ago, Ghana was ranked 70. In Feburary, a local content law took effect that Ghanaian citizens should benefit more from the oil industry. The industry and the government are optimistic that this time the goals can be achieved.

The resource curse is hardly unique to Africa – witness Saudi Arabia’s difficulties in creating employment for its legions of young people. Yet the shadow of Nigeria hangs heavily over Ghana’s transition to oil producer. “It’s a film about how the world works, not about Africa,” says Rachel Boynton, who directed the film. “It is about capitalism and money.”

For Ghanaians, there is still hope that money can be used to the benefit of all.