Falling Oil Prices Will Hurt African Economies

Oil prices are threatening to hurt the economies of several African countries, according to several end-of-year reports.

In an interview released earlier this week by Inter Press Service, African economy expert Dr. Kwame Akonor, from the African Development Institute, gave a grim outlook.

“The high debt overhang and the heavy reliance on raw materials (such as oil) and minerals for exports, makes African economies susceptible to shock and systematic risks,” he said.

According to Akonor, the heaviest toll will be paid by Nigeria, the largest economy in Africa, which depends on oil for about 80 percent of its total revenues.

Regarded as some of the top performing economies in the continent, Algeria, Equatorial Guinea and Gabon will also suffer significantly from the plummeting oil prices, as these economies are also heavily dependent on oil revenues.

Ghana's president announced earlier this week that infrastructure plans could be scaled down due to the budgetary price of oil and the current fall.

An article published by the Brookings Institutions shows that countries like Cameroon, South Sudan and Chad had drafted their budgets assuming record-high prices of over US$100 per barrel.

According to the Financial Times, conflict-stricken South Sudan is now receiving the lowest oil price in the world at US$20-25 a barrel because of the combination of falling prices and unfavorable pipeline contracts.

As a Wall Street Journal report shows, several Western oil giants are halting ambitious exploration and exploitation projects throughout the region until oil prices recover.

A report issued Friday by the Small Cap Network – a website which monitors stock markets – shows that not all of the African companies in the oil sector will be suffering evenly, and some may actually rebound their stock price.

OPEC officials predict that oil prices will not recover until the end of 2015, when they are expected to reach US$80 per barrel.

The Gulf states, members of the OPEC bloc, have refused to cut production rates despite plunging prices.