WHAT HAPPENED TO GHANA …AND LESSONS FOR
NIGERIA
It did not help matters that Ghana did not treat her
neighbors such as Nigerians kindly during their years of
abundance. I recalled all the obstacles the Ghanaian
government put along the way to dissuade potential
Nigerian investors. I'm sure now they wish they hadn't
done so, but again, the damage is done, for I can't see
those Nigerians rushing out to rescue Ghana from
herself.
Not so long ago Ghana was the poster child of everything
that could go right about sub-Saharan Africa, and this
wasn't anything new, the country has always been
ahead of the pack. In spite of the works for agitation of
independence by people like Herbert Macaulay and
Nnamdi Azikiwe both of Nigeria, Ghana managed under
Nkuruma to obtain her independence from Britain in
1957, three years ahead of Nigeria and most other
African countries. In recent years, Ghana became the
place to be in Africa. Their economy was booming, the
country was stable with successive peaceful and
transparent democratic successions. They had steady
light, low inflation, and new offshore oil discoveries that
portends vast riches. Ghana became the number one
destination for black Americans and Jamaicans for
resettlement and for investment. Even Nigerians began
flooding the streets of Ghana for business and leisure,
while many more simply sent off their children to
schools there.
In the past few days, however, Ghanaians have taken to
the streets in protest about the state of their economy,
rising inflation, and the declining value of their local
currency. The Ghanaian President, John Muhama,
recently indicated that Ghana is about to seek financial
bailout from the IMF. Isn't it amazing how times have
changed for Ghana, and rather suddenly because just a
couple of years ago Ghana was still recognized as the
shining example of stability in West Africa. Only last year
the country celebrated ten years of uninterrupted power
supply, something most Nigerians can only dream
about. About six months ago I heard of the first signs
that all was not well with Ghana's economy. At first I
thought it might be just a minor hiccup, perhaps a small
or rather soft landing of an overheated economy, or
maybe that it was only an unfounded rumor without
any merit. Unfortunately everything I heard turned out
to be true, and even worse.
I have since wondered what happened to Ghana, how
could a well-managed economy with seemingly less
corruption than their Nigerian neighbors suddenly take a
nose dive? The answer is still blowing in the wind, but
there are a few pointers that might lead us to where the
problem began. First, sometime ago Ghana decided to
revalue their currency, the cedi. Their central bank
applied a reverse split that ultimately brought the
formerly weak currency to par with the US dollar. For
example, if one had one million cedi in the bank, after
the reverse split the person may now end up with a
thousand cedi, but that cedi will have the same
purchasing parity with the US dollar. I recalled
publishing an article in the US when Ghana did this,
warning them that they are embarking on a never-
ending slippery slope. At the time I sighted countries like
Mexico that have tried doing this with their Peso and
how they have revisited that valuation more than once.
In 2007 Nigeria's Central Bank Governor, Chukwuma
Soludo attempted a similar revaluation of the Naira, and
I published an article (Go East, to China, young man) in
which I cautioned against that move. I reposted that
same article in March last year, cautioning Sanusi.
Fortunately for Nigeria, but for political reasons, the
Yar'adua's government stopped Soludo from carrying on
the revaluation. I believe that Ghana has revalued their
currency more than once since the first time, and
currently the cedi has lost 50% of its value this year
alone, making it the worst performing currency in the
world so far in 2014. As the cedi depreciates, so does
the cost of buying products from overseas, which is
passed on to the consumers and consequently inflation
in Ghana has now topped 15% this year. As mentioned
Ghana celebrated ten years of uninterrupted power
supply last year. It was as if Nigeria, which has failed to
achieve even a day of uninterrupted power supply,
decided to rain in on their parade. Nigeria supplies most
of the gas used to power the electric plants in Ghana,
and lately as Nigeria experienced stoppages due to gas
pipeline vandalism, their supply to Ghana was finally
affected. And suddenly Ghana began to experience
rolling blackouts and just downright power failures that
sometimes lasts for weeks in some neighborhood. Well, I
say to them, welcome to the Nigerian world.
Surely lack of power must have accounted for significant
drops in manufacturing and other business activities,
especially for people that have grown accustomed to
steady power supply through the years, and some might
have failed to make necessary provisions for alternative
source of power as most Nigerians do. But the major
measurable source of decline is about the price of gold.
Gold represents about 45% of Ghana's export, and gold
prices have declined in recent times, undoubtedly
affecting that nation's income. Cocoa has equally been
on the decline though Ghana has significantly reduced
their dependency on cocoa export since it was the
dominant foreign exchange earner for them back in the
fifties and sixties. Apparently overreliance on one
product as it is with gold in this case has come to bite
Ghana harder than they expect. As bad as it is for
Ghana that gold represents 45% of their export, can you
now imagine what could happen to Nigeria if and when
oil prices crash as oil represents well over 90% of our
export revenue. The potential outcome is simply
unfathomable yet no one in Nigeria's government has
taken out time to think seriously about its potentially
devastating effects.
A few years back Ghana discovered oil in their offshore
waters and they have spent quite a bit of money to
develop those oil wells. Their planning on what to do
with the oil revenue was more structured and acclaimed
to be something of a forward thinking approach. But in
the end, the amount of oil being tapped have falling far
short of expectation. Amid all these shortages here and
there, the government of Ghana has become highly
stretched, and are now desperately struggling to make
up for these shortfalls, but it appears that the damage
has been done, and anything short of a major bailout
would mean doom for the country. Ghana has come a
long way; in 2007 it became the first country in sub-
Saharan Africa other than South Africa to issue
international bonds. Today, it's unlikely that issuing
more international bonds would be part of the solution
as those international investors are now fleeing in
droves. It did not help matters that Ghana did not treat
her neighbors such as Nigerians kindly during their years
of abundance. I recalled all the obstacles the Ghanaian
government put along the way to dissuade potential
Nigerian investors. I'm sure now they wish they hadn't
done so, but again, the damage is done, for I can't see
those Nigerians rushing out to rescue Ghana from
herself.
The bottom line is that Ghana is not quite Nigeria. The
economy of Lagos and Akwa Ibom combined is greater
than that of Ghana, and its population is under 30
million. But there are lessons here for Nigeria. If this
can happen to Ghana it surely can happen to Nigeria.
Our over reliance on oil for export revenue is one thing
that makes Nigeria overexposed to the risk of price
fluctuations or worse a crash in price. Our inability to
provide constant power supply continues to be a drain
on the cost of doing business in Nigeria. Our cost of
supporting the Naira is unaffordable to this economy,
and I have written about this issue before. There is no
doubt that corruption has played some role on what is
going on in Ghana, I am certain that we have far
greater corruption in Nigeria. And finally, we must
always keep our doors open, this is America's best kept
secret. Open doors means a constant flow of hungry
immigrants that are willing to work harder than the
otherwise settled population. We have repeatedly
flaunted how Nigeria is growing at 7% annually, it is no
longer true. Last year, Nigeria's economy grew at just
under 6% but I am sure that your political leaders won't
tell you this. And finally, as the Champaign begins to
flow in Abuja and across most state capitals in
anticipation of next year's election, I hope we still keep
our eyes on the ball…on the economy of Nigeria before
we suddenly hear stories as it is happening in Ghana
today.
Michael Nnebe is a former Wall Street Investment
Banker and the Author of several novels, including;
Every Dream Has A Price, Riverside Park, Blood
Covenant, Gloomy Shadows, Passing wishes, Prime
Suspect, and others.
Source: Michael, Nnebe

Nice article. Hope our leaders will learn from Ghana and take necessary step to Help improve d economy. Especially power supply. I think Ghana not allowing Nigerian investors is an act of silliness which later backbite

Whr r d ghanians on nairaland

The message is clear, while embezzling the funds, remember to diversify, consolidate on the power sector. Otherwise, think tomorrow.

holyboss: Whr r d ghanians on nairaland

they are broke and hungry I guess

theplanmaker:


they are broke and hungry I guess

Just got admittd into a sch in Ghana



Dos ds mean I shud not go

What "10 years of uninterrupted power supply" did Ghana celebrate? They've never had "uninterrupted power supply", and nearly half of the country aren't even connected to the national grid! This writer needs to research more before writing what he knows little about.

holyboss: Just got admittd into a sch in Ghana



Dos ds mean I shud not go

of course not. things will now be cheaper for you in Ghana because you are coming from a stronger economy. On the flip side, things will now be cheaper for a lot of other foreigners, who will start buying Ghana up . Whenever you strike oil, the vultures seem to appear from nowhere.

theplanmaker:


they are broke and hungry I guess