Nigeria and other African economies are projected to record substantial revenue losses, particularly from the oil and gas sector, as the devastating effects of the Coronavirus pandemic continue its devastating toll on the various economies.
Giving the projection in a statement on the risks of the pandemic to the continent’s economies, Africa Energy Chamber, quoted the Atlantic Council, an American Atlanticist think tank in the field of international affairs, as noting that the immediate effect of COVID-19 for the sector has been on the demand for crude oil and on its prices.
According to the chamber, most analysts and operators now agree that 2020 could see negative demand growth for oil globally as industries shut down and countries around the world go on lockdown with the attendant effect of oil prices reaching their lowest levels since 1991. It clarified: “For Africa, this means an immediate pressure on state budgets and macro-economic stability.
Apart from South Africa, the continent’s biggest economies rely heavily on oil revenue to fuel state budget and public spending and ensure macro-economic stability.
“All sub-Saharan Africa’s producers had budgeted 2020 with an oil benchmark well above $50, from $51 in Equatorial Guinea all the way up to $57 in Nigeria. With predictions that oil prices won’t go anywhere above $30 for the rest of the year, most budgets need to be re-adjusted and public spending needs to be drastically cut”, the chamber added.
On the pandemic’s direct impact on Nigeria’s revenue potential, the Atlantic Council specifically predicted that COVID-19 would cause the country to suffer the biggest lost in the continent with $15.4bn, representing about 4% of the nation’s GDP.
According to the Council, Congo-Brazzaville could take the hardest hit, with a loss representing 34% of its GPD, in a country where the debt-to-GDP ratio is already around 90%; in Angola, the dip in oil prices at $30 could cause the country a revenue loss of almost $13bn, or 13% of GDP; while Equatorial Guinea, Gabon and Chad could see losses of almost 10% of GDP due to the ongoing crisis.
Commenting on the worrisome scenario, Executive Chairman of the African Energy Chamber and Petroleum industry lobbyist, N.J Ayuk said: “Thousands of Africans and expats are going to be laid off in oil-producing countries as companies shut down their drilling rigs and planned projects. We need to face reality as these times are unprecedented. “The uncertainty is even more frustrating for oil companies and the workers.
Forgive me but there is blood on the streets, in the water and the air has the coronavirus”, the industry analyst added. On what is the way forward for the countries to mitigate the negative economic impact of the pandemic, Ayuk advised: “Petroleum-producing countries must come together and work with the private sector in order to get us through the COVID 19 crisis and mitigate the economic fallout as much as possible.
When the US and Europe are talking about a recession, most African countries and the common man on the streets have likely already entered a depression.”