From Africa Recovery, Vol.14#3 (October 2000), Briefs page

High world oil prices hit Africa's poorer economies

In 1998, Ghana was selling a tonne of cocoa for $1,600 and buying a barrel of oil for $10. By 2000, a tonne of cocoa was earning Ghana just $800, half the price two years earlier, while the cost of importing a barrel of oil in September had more than tripled, to $35. Although the sharp rise in world oil prices has been a boon to Africa's oil exporting countries, Ghana's predicament has been a familiar one for most of the continent's poorer oil importers.

Based on preliminary data and an oil price of $26.53 per barrel, the International Monetary Fund (IMF) estimates that increased oil costs will reduce the current account balance of more than a dozen African countries by around 0.5 per cent of gross domestic product (GDP) this year. Another six -- Burundi, Gambia, Ghana, Mali, Mauritania and Swaziland -- will suffer a decline of more than 1 per cent, estimates the IMF's semi-annual Global Economic Outlook, released in early September. At the same time as oil import costs have risen, notes the report, many non-oil-producing countries in Africa "have faced substantial terms-of-trade losses as export prices of nonfuel commodities and other primary goods remain generally depressed, particularly in real terms." Nevertheless, the IMF projects that the African continent's overall GDP still will grow by around 3.4 per cent in 2000 and 4.4 per cent the following year.

The impact of higher oil prices on the growth of developed economies has so far been negligible, notes the UN Conference on Trade and Development (UNCTAD) in its latest Trade and Development Report, also released in September. If Northern growth were significantly reduced, this would have had the effect of further depressing world market prices for developing countries' nonfuel commodity exports, as happened during the "oil shocks" of the 1970s. UNCTAD recognizes, however, that since a majority of African countries are oil importers, their economic performance may be seriously affected. This is despite the fact that overall African demand for oil, 2.4 mn barrels a day in 1999, is only a fraction of North American usage (22.8 mn barrels) and is small compared even to Latin American demand (4.6 mn barrels).

Those African countries that export significant quantities of oil -- including Nigeria, Angola, Algeria, Cameroon and several others -- are expected to benefit from the higher oil prices. Both the IMF and UNCTAD reports caution, however, that they should make careful use of the extra income. Domestic critics in these countries have frequently questioned how oil revenues currently are used, seeking greater transparency and expanded allocations for health, education, capacity building and other development purposes.

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