Uganda’s Oil discovery calls for cautious optimism

strategist@afripol.org                 www.afripol.org

Economic Analysis and Commentary by Afripol Organization.

A large oil reserve estimated 2 billion barrels has been found in the Albert region of Uganda by oil firms Tullow Plc and Heritage Oil & Gas Company. The people of Uganda including President Yoweri kaguta Museveni are elated about the discovery. This is good news and with efficient management Uganda can say good-bye to poverty. Uganda can now increase her GDP and foreign reserve.

The oil discovered in Uganda contains less sulfur which is good but it is waxy with high viscosity. It does easily coagulate at room temperature making it difficult to extract and transport. Therefore it might be expensive to extract and refine. It is estimated that Uganda needs $8 billion to develop its oil infrastructure. Uganda does not have such enormous capital instead she will turn to foreign financiers and international financial institutions. Uganda must be deliberate, careful and calculative in order not give up her new found wealth by payment of high interest rate and arrears on loans for financing the oil development.

The East African country – Uganda is a poor country with majority of the population surviving with less than one dollar a day. In next two years the production, exploration and extraction of the oil will be in full force. Most of the oil produced will be geared towards internal consumption and the remaining will be for export.

Uganda is making arrangement with Norway to build a functional oil refinery in the country so she can process crude oil in her country and provide jobs to the citizens. Unlike Nigeria that refine her crude oil outside the country due the breakdown of her ill-equipped refineries, Uganda is making the right decision to use her oil to lunch industrialization in her country.

This is a big breakthrough for Uganda and 30% of the revenue to finance her budget comes from foreign donors. Therefore with this development Uganda will free herself from foreign donation and its attached strings. Uganda must live up to her international obligations with unwavering commitments to democracy, free enterprise and respect for human rights.

Uganda government and managers can now formulate economic policy to transform their country. President Yoweri kaguta Museveni has been talking about industrializing his country; with the new found resources he can lay down the industrial rudimentary that will prepare her country to take off industrially. The most important thing the government and policy makers can do is to train their work force with superior education that is needed to compete and perform efficiently in 21^st century globalized economy.

With this new found wealth from oil, the country might be tempted to neglect the agricultural industry of the nation and relied on food importation to feed her people. It will be a big mistake with deplorable ramifications. The country must be vigilant and utilized the oil generated resource to booster agriculture in the country.

On agriculture, Emeka Chiakwelu, Principal Policy Strategist at Afripol said, “Agriculture is the future of Uganda and Africa for arable land must be cultivated. Oil can generated the capital to finance modern farming in Uganda. Africa must feed herself and Uganda can become food exporter. Oil is a limited and diminishing energy based commodity and its future is unstable with the emergence of renewable energy for 21^st century. Uganda must diversify her economy, so she will not depend wholly on oil.”

Uganda just like the rest of African countries is beset with poverty and corruption. If the government of Uganda is serious about improving the lot of their people, they must be aggressive in arresting the two mentioned problems. The government must explore the ways to improve the standard of the living especially in the rural areas. The basic needs of housing, light, clean drinking water and roads must be provided to ameliorate wellbeing in the urban and rural areas.

The environmental integrity of the nation must be upheld in spite of the temptation to relegate the issue of environment to the back burner. Oil exploration is associated with oil spill and air pollution that can pose a threat to the environment, which can devastate the ecosystem. Therefore this calls for standard of operation backed with best management practices to be formulated and implemented.

The issue of corruption associated with petrodollar is a reality in that part of the world. The poor people of African oil producing countries including Nigeria, Angola and Gabon are testaments and have not benefited from their country’s oil wealth.

The only panacea to corruption is transparency and open book. The news coming from Uganda that the government is not disclosing the contracts they signed with the oil companies is not encouraging.. Uganda claims to be a democratic nation and in democracy the power belongs to the people. There must be an open book, transparency and probity in order to avoid the curse of oil wealth in the east African country.

Africa Political and Economic Strategic Center (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa. www.afripol.org