What countries produce oil in Africa? What economic situation do they have now? The price of petroleum affects the whole world! What is happening in Nigeria? What will happen next? Find out here!
For some countries in Africa, the fall in oil prices means the lack of budget funds, rising inflation and food shortages, for others it means significant savings. Let’s talk about oil producers countries and oil industry outlook.
Falling revenues, inflation, and withdrawal of foreign investors – this is a response to the decline in energy prices of the economies of oil-producing countries in the African continent. However, some states get an advantage from falling of oil prices. Let’s find out who won and who lost from ‘the cheaper oil’.
Nigeria: Africa's largest economy in debt
Nigeria has a long oil industry history. According to the International Monetary Fund (IMF), the sale of oil provides Nigeria, with the largest size of the economy in Africa, at least 80 per cent of export earnings, which are used to finance the state budget. Due to low oil prices the deficit will increase by half, the analyst Francesca Busan specializing in the African region predicts.
Nigerian authorities expect that the budget deficit this year will be about $ 15 billion, writes The Financial Times. They are trying to support the limping economy, increasing public spending, which further inflates the budget deficit, the newspaper notes. Due to the growth of public debt creditors, knowing the risks, often willing to issue new loans only at higher interest rates.
Angola: without resources for food and infrastructure
According to UN statistics, in 2013, Angola exported oil for about 68 billion dollars. Last year after the oil barrel has lost two thirds of its value, many local residents have extremely hard time. A considerable amount of food the country imports. Due to the decline in revenues from the sale of oil and the fall of the volume of foreign exchange reserves buying food in the previous numbers becomes impossible.
‘The markets do not have enough goods, as a result prices soared to dizzying heights,’ - says the economist from Angola Antonio Panzi in an interview. In remote parts of the country supermarkets and retailers, trying to avoid the hype and the emergence of the black market, limited the number of sold products in one hand. One purchaser can now buy one sack of rice, a bottle of oil and sugar packet.
The government of Angola has already announced plans to cut budget spending by 25 percent. It will happen reducing primarily funds for infrastructure projects - roads, ports and airports, as well as hospitals and schools.
Republic of Congo: budget increase
Republic of Congo authorities did the opposite: before the March 20, the presidential elections, the government decided to increase the cost of the budget by one-third of. This is despite the fact that last year the economic growth of the country, was slowed by one percentage point compared with 2014 year, when GDP grew by 6.8 per cent. At the same time the country's public debt (to the IMF data) grew by almost half.
Oil is an important source of income for Congo. Officials hope to increase the level of production from new projects, thus providing additional revenue. At the same time Congo is going to diversify the economy and invest in infrastructure, more forestry and mining. However, the experts doubt that any country can increase budget spending without increasing the volume of public debt.
Sudan and South Sudan: a dispute on transit fees worsens the situation
In these two countries, the crisis is associated with the fall of oil prices, exacerbated by political conflict. In July 2011, South Sudan, where the main oil fields are located, gained independence from Sudan, in which there are oil pipelines.
In this regard, South Sudan has to pay the neighboring state fee for transit of oil. This is 22.5 euros per barrel in addition to the costs associated with the production. With the price of oil below 30 dollars per barrel, such additional costs turn into huge losses for South Sudan.
Earlier this year, the country's government (according to media reports) said that production would stop, if they failed to persuade Sudan to lower the costs.
Mozambique: gas investments?
For several years Mozambique could boast a constant economic growth. Thanks to the newly discovered deposits of gas the country hopes to achieve rapid growth. Companies from the United States and Italy have already promised to build a plant for the production of liquefied gas. Meanwhile, the price of gas, as well as the cost of oil, remains at a low level, which means that the country's authorities’ hope to high budget revenues from the sale of gas cannot be justified.
However, Chris Bredenhan, an expert on oil and gas in the Price Waterhouse Coopers (PWC) in South Africa, is optimistic: ‘Oil and gas companies make long-term investments, so they do not expect to earn a lot in two years or five years, they are interested in a long-term profit. It's about the planning horizon of 20 or 30 years’.
Zimbabwe and Malawi get benefits of cheap oil
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The low oil prices do not pose a threat for all African States. The countries that do not produce oil and have no access to the sea, usually have very expensive gasoline. This is due to the high cost of logistics. For example, in Malawi and Zimbabwe, the cost of fuel is the highest in Africa.
However, due to low oil prices the cost of gasoline in Malawi has dropped by a quarter over the past two years. In Zimbabwe, the head of control management in the energy sector Gloria Magombo reported that soon the price of fuel will fall even more.
In late February, a liter of gasoline cost was $ 1.24, and diesel fuel cost a dollar. ‘In Zimbabwe, the diesel fuel is often used to produce electricity - Chris Bredenhan of the PWC said -. Because of a low cost of fuel people will save more funds, as electricity and transport costs are reduced’.
What happens now?
On Monday, June 27 world oil prices continued to fall because of the decision of the British voters to leave the European Union. In morning trading of West Texas Intermediate oil became cheaper by 26 cents to 47.38 dollars, while oil Brent - by 15 cents to 48.26 dollars per barrel. The cost of both brands has fallen nearly by 10 percent since then, as in June it had reached the record levels for the entire 2016. The experts predict that in a few years we can meet a global crisis, which affects all the world countries.
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