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Bright Simons: Why Ghana’s Fiscal Anchor Must Pivot from Oil to Gold

Introduction

Economic stability often hinges on a nation’s ability to manage its natural resources effectively. In a recent analysis, policy analyst Bright Simons has challenged the conventional framework of Ghana’s fiscal planning. He argues that the country’s continued reliance on oil as a primary economic indicator is outdated and misleading. Instead, Simons proposes a significant structural shift: anchoring Ghana’s financial forecasts and national budgeting on gold rather than oil. This article breaks down the rationale behind this recommendation, examining the data, historical context, and practical implications for Ghana’s economy.

Key Points

The Shift in Focus: Ghana should move away from “split reporting” (separating oil and non-oil metrics) and prioritize gold due to its growing dominance in exports.
Declining Oil Revenues: Oil production has been falling since 2019, and revenues dropped by 56% in the first half of 2025, making it a volatile and unreliable fiscal anchor.
Rising Gold Dominance: Gold is projected to account for 70% of Ghana’s exports, far outstripping oil’s contribution (which fell below 12% in Q1 2025).
Sovereign Wealth Funds: The returns from Ghana’s Petroleum Heritage and Stabilization Funds have been minimal, suggesting that oil wealth has not translated into significant long-term fiscal security.
Structural vs. Cyclical: The decline in oil is not merely cyclical (a temporary bear market) but structural, necessitating a permanent rethink of fiscal policy.

Background

To understand the current proposal, it is necessary to look at how resource-rich nations manage their economies. In the 1970s and 1980s, many countries experienced the “resource curse.” While commodities like oil initially boosted economic growth, price volatility and exchange rate shocks often led to economic instability. This phenomenon, often linked to “Dutch Disease” (where resource exports crowd out other sectors), forced governments to adopt more transparent budgeting methods.

Following this global trend, Ghana adopted “split reporting” after it began commercial oil production in 2010. Similar to Nigeria, the Ghanaian Finance Ministry began separating macroeconomic forecasts into “oil GDP” versus “non-oil GDP,” and “oil revenue” versus “non-oil revenue.” The intent was to isolate the volatility of the oil sector from the rest of the economy to avoid over-optimistic budgeting. However, Bright Simons argues that this separation has outlived its usefulness and may now be obscuring the true drivers of Ghana’s economy.

Analysis

The Case Against Oil as a Fiscal Anchor

A fiscal anchor is a constraint on government spending, often tied to expected revenues. For years, oil has served as this anchor for Ghana. However, the data suggests this foundation is cracking. In the first half of 2025 alone, oil revenues declined by a staggering 56%.

Furthermore, oil production has been in a steady decline, dropping by approximately 7.5% annually since 2019. The economic contribution of oil has dwindled to the point where it contributed less than $150 million to corporate tax and approximately $370 million to total revenue out of an $8 billion pool in H1 2025. This represents a mere 4.5% of total revenue. Simons questions the logic of using such a volatile and diminishing resource as the primary anchor for national fiscal planning.

The Minimal Impact of Petroleum Funds

One of the original justifications for oil exploitation was the creation of sovereign wealth funds designed to save windfalls for future generations. The Petroleum Heritage Fund and the Stabilization Fund were established to buffer the economy against price shocks. However, the returns have been underwhelming.

In 2023, the Heritage Fund yielded only $29 million, rising marginally to $37 million in 2024. The Stabilization Fund performed even worse, generating just $8.7 million in 2024. These figures are negligible relative to the country’s fiscal needs and suggest that the mechanism for capturing oil wealth is not functioning as intended.

The Structural Rise of Gold

Contrasting the decline of oil is the meteoric rise of gold. While oil advocates might argue that the sector is simply in a bear market, Simons points to structural changes. Since 2019, gold has consistently increased its share of Ghana’s export portfolio.

Projections indicate that gold will soon hit 70% of total exports. In stark contrast, oil’s share of exports dropped below 12% in the first quarter of 2025. This is not merely a seasonal fluctuation; it represents a fundamental shift in Ghana’s comparative advantage and export composition.

Comparative Context: Ghana vs. Nigeria

It is important to note that the argument to de-emphasize oil is specific to Ghana’s economic structure. In Nigeria, oil remains a behemoth, contributing roughly 65% of government revenue and over 85% of exports, despite making up a smaller percentage of total GDP. For Nigeria, oil remains a valid, albeit risky, fiscal anchor.

Ghana, however, has a different profile. The economy is more diversified, and gold has overtaken oil in economic significance. Therefore, the “Nigerian model” of split reporting—where oil is ring-fenced in the budget—no longer fits Ghana’s reality.

Practical Advice

Transitioning the fiscal anchor from oil to gold requires concrete policy changes. Bright Simons suggests the following practical steps for the Ministry of Finance and economic planners:

1. Reclassification of National Accounts

The government should stop the practice of splitting national accounts into “oil” and “non-oil” categories. Instead, the budgeting process should highlight “mineral” versus “non-mineral” revenues, with a specific emphasis on gold. This would provide a more accurate picture of the economy’s health and volatility.

2. Reforming Sovereign Wealth Structures

Ghana should restructure its sovereign wealth mechanisms to align with gold rather than oil. Simons proposes creating a specialized wing within the Ghana Infrastructure Investment Fund (GIIF) or a similar entity. This wing would be tasked with absorbing gold windfalls during price rallies. Unlike the petroleum funds, which have yielded minimal returns, a gold-focused fund could leverage the high liquidity and value retention of precious metals.

3. Adjusting Fiscal Targets

Government spending and revenue targets must be decoupled from optimistic oil forecasts. Given the 56% decline in oil revenue in H1 2025, budgets must be conservative regarding oil and more aggressive in capturing value from gold exports. This includes ensuring that mining royalties are maximized and efficiently collected.

FAQ

Why is Bright Simons suggesting a shift from oil to gold?

He argues that oil is no longer a reliable source of revenue for Ghana, citing a 56% decline in oil revenues in H1 2025 and a structural drop in production. Conversely, gold now accounts for a dominant share of exports (projected at 70%) and offers a more stable foundation for fiscal planning.

Is this shift just a response to a temporary bear market in oil?

No. The analysis suggests the shift is structural. Oil production has been falling consistently since 2019, while gold has grown as a percentage of exports over the same period. The trend indicates a permanent change in Ghana’s export profile.

What is “split reporting”?

Split reporting is a budgeting method where the government separates its financial statements into “oil” and “non-oil” components. This was done to manage the volatility of oil revenues. Simons argues this is now a waste of time for Ghana because oil revenues have become too small to warrant such separation.

How does this affect the Petroleum Heritage Fund?

It highlights the inefficiency of the current fund structure. The Heritage Fund generated only $29 million in 2023. The proposal suggests that future windfalls should be managed through mechanisms better suited to gold, potentially offering better returns and stability.

Does this mean oil is irrelevant to Ghana?

While oil is becoming less dominant, it still contributes to revenue. However, Simons argues it should no longer serve as the “fiscal anchor”—the primary benchmark against which national spending and economic health are measured.

Conclusion

Bright Simons’ analysis offers a compelling critique of Ghana’s current fiscal framework. By clinging to oil as the primary economic anchor, the government risks basing its budgets on a diminishing and volatile resource. The data clearly shows that gold has emerged as the heavyweight in Ghana’s export economy. Reclassifying national accounts to reflect this reality and reforming sovereign wealth mechanisms to capture gold windfalls could provide Ghana with a more stable and truthful fiscal foundation. As the global economy evolves, so too must the mechanisms nations use to measure their wealth.