Infrastructure spend by Africa’s largest oil producing countries, Nigeria and Angola, will be hard-hit by the retreating global oil price, which has more than halved since June last year and is currently at $58/bl.
“Angola and Nigeria are not in a fortunate position. Nigeria has a severe infrastructure backlog requiring significant capital [investment].
These will be severely impacted by the decline in the inflow of oil revenues [and] we have already seen the naira losing some 10% of its value since the start of the oil price shock.
“Meanwhile, with oil revenues representing over 90% of Angola’s earnings, 70% of government revenues and 44% of its gross domestic product (GDP), the government has been forced to revise its Budget, cutting about $14-billion of planned public spending,” Encorex director and former PetroSA corporate strategy VP Godwin Sweto said during a Frost & Sullivan webinar this week.
Despite lower oil revenues, Nigeria’s growth was expected to remain fairly robust, reaching 4.8% this year and 5% in 2016, driven primarily by the nonoil economy.
In Angola, Sweto reiterated that key infrastructure spending and social programmes had been “massively” cut down or frozen, citing delays to the roll-out of a $5-billion electricity coverage programme and the stalling of a road construction plan.
Elsewhere on the continent, former adviser to Engen Petroleum’s CEO, Dave Wright said upsides to the depressed oil price were likely become visible in nonproducing African countries, such as South Africa. Consumers could well enjoy greater spending power, with a positive GDP spin-off, he added.
