Oil Money To Boost Agriculture Sector
Story by Gilbert Boyefio
The Ministry of Food and Agriculture will soon table a Bill before Parliament seeking a certain percentage of the oil revenues accrued to government to be channel into the agricultural sector. This is to ensure that the agricultural sector remains vibrant and not strangled by the booming oil and gas industry in the country.
It will also ensure that the multiplier effect of the oil and gas industry in agriculture are exploited and maximize to drive economic growth.
Since the inception of the commercialization of oil in Ghana, many have expressed the fear that the oil and gas sector is going to lead to the neglect of the agricultural sector, which has been the backbone of the country’s economy for decades, and consequently warned government to be cautious.
One crystal example that is often mentioned in this direction is the economy of Nigeria. According to a report by Fidel Ezeala-Harrison, titled structural re-adjustment in Nigeria: diagnosis of a severe Dutch disease syndrome; before Nigeria’s oil sector boomed due to the high oil prices of the 1970’s, the country was the world’s second largest exporter of cocoa and the agricultural sector contributed approximately 60 percent to the country’s total exports.
However, in 1980 agricultural products’ share of total Nigerian exports was only 2.4 percent.
Another report by Baker Institute Energy Forum in 2006 on Nigeria and the Future Global Gas Market indicated that the Nigerian economy was heavily dependent on oil revenue. However, despite dominating government spend and revenue earnings, the industry have had a disproportionately low contribution to total GDP (30%) and overall economic transformation of Nigeria.
In Ghana though, the agricultural sector has been and remains to be a major contributor to the growth of the economy, despite the existence and competition from other natural resources such as gold, bauxite, diamond, manganese and timber. The agricultural sector was cited as the major contributor for the country’s attainment of single digit inflation.
According to the Ghana Statistical Service the June 2011 inflation rate of 08.59%, 0.31 percentage points lower than that of May (8.90%) can be attributed more to the food and non-alcoholic beverages group.
The food and non-alcoholic beverages group has been recording single digit inflation rate and declining since January 2010. In the food group (which has a weight of 44.91%), sub groups with the highest inflation rates are Sugar, jam, honey, syrups, chocolate and confectionary (14.17%), Oil and fats (13.75), Coffee, tea and cocoa (12.03%); and Fruit (11.92%), relative to the average June food inflation rate of 2.78 per cent.
Justifying the intention to request for a certain percentage of the oil revenue to be allocated to the agricultural sector, Hon. Yaw Effah-Baafi, Deputy Minister, Food and Agric (Crops), noted that “the agricultural sector affects every facet of the economy of the country, hence the need to prioritize it during budgetary allocations.”
He pointed out that about 56 percent of the adult population in Ghana is in agric and as such government cannot make the mistake of neglecting the sector.
Speaking to O&G Ghana magazine, the Minister insisted that about 10-15 percent of the oil revenue accrued to government should be channeled into the agricultural sector for infrastructural development such as warehouses, irrigations, procurement of farming machineries, and feeder roads.
This Bill is however in it concept stages.
Touching on the synergies between the oil and gas sector and the agricultural sector, the Minister indicated that government has signed an MOU with India to set up a fertilizer plants at Takoradi, which is already underway, to produce fertilizers from the byproduct of the crude oil.
Hon Effah-Baafi said carbon dioxide, another byproduct from crude oil, if not in excess is good for the environment and the cultivation of some plants. This helps in greening the environment. Currently in the Western Region, a lot of farmers are embarking on rubber and oil palm plantation.
The Ministry of Food and Agriculture believes the oil and gas industry will boost productivity in the agric sector since government will have extra funds from the oil revenue to fulfill its commitments to the agric sector.
Government has embarked on a strategic intervention in the agricultural sector by subsidizing agric inputs and modernizing agric in 86 districts in Ghana. This initiative is to be spread throughout the 170 districts by 2012. By the end of the first quarter of 2012, government will take delivery of 1500 tractors from Brazil to be distributed to the districts. The first two installments of 1000 tractors would be received by the end of this year.
As part of measures to ensure all year round farming government is focusing on rehabilitating all irrigation facilities in the districts and also providing new ones to boost productivity.
The Ministry of Food and Agriculture will soon table a Bill before Parliament seeking a certain percentage of the oil revenues accrued to government to be channel into the agricultural sector. This is to ensure that the agricultural sector remains vibrant and not strangled by the booming oil and gas industry in the country.
It will also ensure that the multiplier effect of the oil and gas industry in agriculture are exploited and maximize to drive economic growth.
Since the inception of the commercialization of oil in Ghana, many have expressed the fear that the oil and gas sector is going to lead to the neglect of the agricultural sector, which has been the backbone of the country’s economy for decades, and consequently warned government to be cautious.
One crystal example that is often mentioned in this direction is the economy of Nigeria. According to a report by Fidel Ezeala-Harrison, titled structural re-adjustment in Nigeria: diagnosis of a severe Dutch disease syndrome; before Nigeria’s oil sector boomed due to the high oil prices of the 1970’s, the country was the world’s second largest exporter of cocoa and the agricultural sector contributed approximately 60 percent to the country’s total exports.
However, in 1980 agricultural products’ share of total Nigerian exports was only 2.4 percent.
Another report by Baker Institute Energy Forum in 2006 on Nigeria and the Future Global Gas Market indicated that the Nigerian economy was heavily dependent on oil revenue. However, despite dominating government spend and revenue earnings, the industry have had a disproportionately low contribution to total GDP (30%) and overall economic transformation of Nigeria.
In Ghana though, the agricultural sector has been and remains to be a major contributor to the growth of the economy, despite the existence and competition from other natural resources such as gold, bauxite, diamond, manganese and timber. The agricultural sector was cited as the major contributor for the country’s attainment of single digit inflation.
According to the Ghana Statistical Service the June 2011 inflation rate of 08.59%, 0.31 percentage points lower than that of May (8.90%) can be attributed more to the food and non-alcoholic beverages group.
The food and non-alcoholic beverages group has been recording single digit inflation rate and declining since January 2010. In the food group (which has a weight of 44.91%), sub groups with the highest inflation rates are Sugar, jam, honey, syrups, chocolate and confectionary (14.17%), Oil and fats (13.75), Coffee, tea and cocoa (12.03%); and Fruit (11.92%), relative to the average June food inflation rate of 2.78 per cent.
Justifying the intention to request for a certain percentage of the oil revenue to be allocated to the agricultural sector, Hon. Yaw Effah-Baafi, Deputy Minister, Food and Agric (Crops), noted that “the agricultural sector affects every facet of the economy of the country, hence the need to prioritize it during budgetary allocations.”
He pointed out that about 56 percent of the adult population in Ghana is in agric and as such government cannot make the mistake of neglecting the sector.
Speaking to O&G Ghana magazine, the Minister insisted that about 10-15 percent of the oil revenue accrued to government should be channeled into the agricultural sector for infrastructural development such as warehouses, irrigations, procurement of farming machineries, and feeder roads.
This Bill is however in it concept stages.
Touching on the synergies between the oil and gas sector and the agricultural sector, the Minister indicated that government has signed an MOU with India to set up a fertilizer plants at Takoradi, which is already underway, to produce fertilizers from the byproduct of the crude oil.
Hon Effah-Baafi said carbon dioxide, another byproduct from crude oil, if not in excess is good for the environment and the cultivation of some plants. This helps in greening the environment. Currently in the Western Region, a lot of farmers are embarking on rubber and oil palm plantation.
The Ministry of Food and Agriculture believes the oil and gas industry will boost productivity in the agric sector since government will have extra funds from the oil revenue to fulfill its commitments to the agric sector.
Government has embarked on a strategic intervention in the agricultural sector by subsidizing agric inputs and modernizing agric in 86 districts in Ghana. This initiative is to be spread throughout the 170 districts by 2012. By the end of the first quarter of 2012, government will take delivery of 1500 tractors from Brazil to be distributed to the districts. The first two installments of 1000 tractors would be received by the end of this year.
As part of measures to ensure all year round farming government is focusing on rehabilitating all irrigation facilities in the districts and also providing new ones to boost productivity.
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