The government of Ghana, earlier this week, presented its 2025 Budget Statement, detailing its fiscal and economic policies for the country.
The budget contains several provisions significant for various sectors, with particular attention on the energy and extractive industries, which have historically been pivotal to the country’s economic stability and growth.
For stakeholders in these sectors, understanding how the budget will shape policy and funding allocations is crucial, as these industries are major drivers of national revenue and job creation.
One of the most notable changes in the 2025 Budget is the government’s decision to allocate all Annual Budget Funding Amount (ABFA) revenues exclusively to infrastructure projects.
The government decided to allocate 100% of ABFA revenues to infrastructure projects. Previously, the Petroleum Revenue Management Act (PRMA) required that 70% of ABFA funds be directed toward public investment, with the remaining portion allocated to goods and services in priority sectors.
The Africa Center for Energy Policy (ACEP) has welcomed this shift, emphasizing its potential benefits for Ghana’s infrastructure deficit.
“This budget proposal marks a departure from previous practices.
“The key advantage of this new approach is its increased focus on infrastructure development, which is essential for addressing Ghana’s significant infrastructure deficit.”
Africa Center for Energy Policy (ACEP)
The government’s decision to channel all ABFA funds into infrastructure is expected to accelerate major projects, including roads, railway systems, health and education facilities, and other critical public works.
Proponents argue that such investments will enhance economic growth by improving transportation networks, expanding access to essential services, and facilitating industrial productivity.
However, ACEP cautioned that this move should be carefully managed to ensure it delivers the desired outcomes.
“To fully realize the benefits of this strategy, careful attention must be given to ensuring transparency, the quality of project delivery, and value-for-money considerations in the procurement and delivery of these infrastructure projects.”
Africa Center for Energy Policy (ACEP)
Persistent concerns over mismanagement and inefficiencies in ABFA-funded projects have led to skepticism. ACEP, emphasized that the government must ensure that past mistakes are not repeated.
“The government needs to address the governance weaknesses that have plagued infrastructure projects in Ghana.
“Without proper oversight, this well-intended policy could become another avenue for resource misallocation.”
Africa Center for Energy Policy (ACEP)
Reduction of GNPC’s Share of Net CAPI
Another major policy shift in the 2025 Budget is the reduction of GNPC’s share of net CAPI from 30 percent to 15 percent.
Under the PRMA, GNPC is entitled to up to 55 percent of net CAPI revenues for Level B financing, in addition to equity financing costs (Level A financing).
However, since 2011, the Corporation has received 30 percent of net CAPI, amounting to $1.32 billion out of its total $2.99 billion in receipts.
The government’s decision to cut GNPC’s share is aimed at enforcing financial discipline within the Corporation, which has been criticized for prioritizing general operational expenditure over core investments in oil and gas exploration and production.
“Unfortunately, over the years, GNPC has prioritized growing its general operational expenditure, staff costs, administration cost, capital expenditure, and corporate social responsibility, at the expense of real investments in its core mandate.”
Africa Center for Energy Policy (ACEP)
A glaring example of this inefficiency is the Voltaian Basin project, where GNPC reportedly spent over $150 million gathering 2D seismic data without drilling a single exploration well, despite the original budget for data acquisition and drilling being $60 million.
In light of the corporation’s spending habits, the reduction in its CAPI share is seen by some as a necessary move to curb wasteful practices. However, ACEP raised concerns that the reduction may not have the desired effect.
“While this budget proposal appears to force the Corporation to cut down its expenditures by reducing its share of net CAPI, it fails to consider that GNPC has shielded its profitable additional 7 percent interest in the Jubilee field, which is managed by its subsidiary GNPC Explorco.”
Africa Center for Energy Policy (ACEP)
The additional 7 percent interest, acquired from JOHL, has generated about $418 million in cumulative receipts as of June 2024, which ACEP suggests could allow GNPC to continue its operations without significantly altering its spending habits.
Ghana’s 2025 Budget introduces major policy changes with significant implications for the energy and extractive sectors.
While the decision to allocate all ABFA revenues to infrastructure projects has the potential to drive national development, ensuring transparency and efficiency will be critical.
Similarly, reducing GNPC’s share of net CAPI may curb some financial excesses, but without broader governance reforms, the Corporation’s inefficiencies could persist.
As Ghana moves forward with these budgetary policies, policymakers, industry players, and civil society organizations must remain vigilant to ensure that the intended benefits of these changes are fully realized, rather than becoming avenues for continued mismanagement.
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