• Home
  • About us
  • Who are we
  • Studies and Research
  • Our expertise
  • Our references
  • Contact
Africa Partners

Your investment office for Africa

Economics, English, Studies and Research 0

Why the plunge of oil prices is good news for Africa

By Christian Hiller von Gaertringen @@Chr_Hiller · On 5 February 2016

Many observers are concerned about the negative consequences that oil exporting countries such as Nigeria, Sudan or Angola suffer due to falling oil prices. But in our view low oil prices are good news for the continent.

 

Does the severe plunge in oil prices call into question the African rise story? If you look at the latest news it seems so. This week Nigeria and Angola, the continent’s biggest oil producing countries, engaged both talks with the World Bank about support to help cope with low crude prices and its effects on their currencies and public finance.

We at Africa Partners did never support the idea that natural resources were the main growth driver behind the economic rise of the African continent. Natural resources cannot explain the rapid progress countries such as Kenya, Ethiopia, Uganda or Rwanda were making in the past ten years. Oil deposits have been discovered in these countries only recently and will not exploited before 2017 as it is expected for Kenya.

As we did not see in natural resources in the past the main trigger for the economic upswing in the past, we do not believe now that falling oil prices will end the African growth story.

It is true that most politicians of oil exporting countries did not manage well the treasures under their feet. Muhammadu Buhari, the Nigerian president, recently admitted that the country’s oil wealth has been badly managed. It is true that falling oil prices risk creating harmful effects on the economies of the oil exporting countries. They can force governments to cut expenditures and weaken their currencies which is likely to push inflation. These two effects could be catalysts for social unrest.

But not even ten of the 54 African countries produce oil. All the other countries depend on oil imports. For them, lower crude prices are good news. Kenya, Ivory Coast, Seychelles and Ethiopia spend more than 20% of their import bill to buy oil. The rating agency Fitch estimates that the plunge in oil prices has boosted growth on the African continent from 4.5% in 2014 to 5.0% in 2015.

It is well established among economists that natural resources fail to deliver growth. The plunge in oil prices demonstrates that African governments should not rely on oil, gas, gold, diamonds or metals. They should rather develop services and manufacturing to create for their population jobs, income and wealth.

Share Tweet

Christian Hiller von Gaertringen

Thanks to his financial expertise, dense international network and deep understanding of the African economy Christian is a renowned expert and keynote speaker for business and finance in Africa.

You Might Also Like

  • Building a bridge in Lagos: How private equity can better its chances in Africa Africa Capital News

    How private equity can better its chances in Africa

  • Office building in Kigali: Africa can compete with other regions when it comes to ESG Africa Capital News

    Africa, the land of ESG investments

  • A big step toward African financial independence: Cape Town, South Africa English

    A big step toward African financial independence

No Comments

Leave a reply Cancel reply

You must be logged in to post a comment.

Most viewed categories

  • Studies and Research
  • Agriculture
  • Economics
  • English
  • Deutsch

Choose your category

Find us on Facebook

Read more on the African growth story

Read more on the African growth story in my book “Afrika ist das neue Asien” published in German by September 2014 with the publishing house Hoffmann & Campe in Hamburg.
  • Impressum
  • Rechtliche Hinweise
  • Datenschutzerklärung
  • Contact

Most viewed categories

  • Studies and Research
  • Agriculture
  • Economics
  • English
  • Deutsch

Latest News

  • Building a bridge in Lagos: How private equity can better its chances in Africa

    How private equity can better its chances in Africa

    1 April 2022
  • Office building in Kigali: Africa can compete with other regions when it comes to ESG

    Africa, the land of ESG investments

    24 February 2022
  • A big step toward African financial independence: Cape Town, South Africa

    A big step toward African financial independence

    29 October 2021

Jetzt abonnieren

Search the site

© 2020 Antigone Communications All rights reserved.