Africa Press-Nigeria:
Until Monday evening, many might have found the idea of living in a world where someone selling oil would have to pay the “buyer” to take it off of their hands completely fanciful, more so of all emerging economies with commodities to sell.
For the first time in history, crude oil prices into negative territory this week because of the Covid-19 pandemic that has sent demand for the fuel crashing as the world’s leading economies have ground to an almost complete halt over the past few weeks.
Oil producing nations, such as Nigeria and Angola, with their disproportionately high reliance on the fuel, are set for a difficult period.
In Nigeria “…oil is almost 90% of revenue. Even though the economy is diversified, the export of oil makes the country very dependent on oil for foreign exchange and revenues,” economist Diana Games said.
Some of South Africa’s largest companies such as MTN, Shoprite and Standard Bank have large exposure to Africa’s biggest economy that has come under significant economic pressure since the oil price peaked in July 2014. The country “is not out of the woods yet,” Games added.
Nigeria produces an estimated 2.5 million barrels of oil per day and contributes just less than 10% to the gross domestic product of Africa’s largest economy.
The oil price crash comes ahead of a Wednesday meeting where President Cyril Ramaphosa is expected to chair an African Union Bureau virtual meeting of business leaders to discuss the continental impact of Covid-19 pandemic. Economies in the Maghreb and west African regions are set to reel in the fallout as well.
According to its latest report, the World Bank projects economic growth in Sub-Saharan Africa will decline from 2.4% in 2019 to -2.1% to -5.1% in 2020. This would thrust the region into its first recession in 25 years, the report said.
Angola is the second largest producer of oil in Africa, producing an estimated 1.9 million barrels a day. According to the World Bank, oil production in Angola accounted for a third of its gross domestic product and 90% of the country’s exports in 2018.
