Page 68 - Vol 33 Issue 34 2021

Contours of the Covid-19 Crisis for African Oil and Gas Exporting
Countries
oil Insight

By John R. Heilbrunn

ith the outbreak of COVID-19, prices for oil fell precipitously. On December 31, 2019, North Sea Brent
Wcrude, a benchmark, sold for approximately $68.00 a barrel. However, when on April 20 traders recognized
that the coronavirus was a global pandemic, prices for Brent dropped to a little more than $25.00 per barrel.
In the United States, West Texas Intermediate (WTI), another benchmark, dropped to negative values when
producers confronted a choice to shut down their installations or pay buyers to stock their crude. Recovery has
been slow; on 18 September 2020, prices per barrel were $41.00 for WTI and $43.09 for Brent. Without question,
the international price for crude oil has serious implications for African exporters. By any measure, the global
pandemic had a major impact on African oil and gas exporting countries.

In 2020, the coronavirus spread internationally. This essay considers first the impact of COVID-19 Nigeria
Oil exporting countries in Africa awaited on Ghana, Nigeria, and Angola. Second, it briefly
COVID-19 in an already precarious situation. The discusses other oil exporters. With at least 201 million people, Africa’s largest
African media made dire predictions. In African population, Nigeria is a semi-democratic
oil democracies, transparency about the infection Ghana government. It is a country with many cities and
and death rates is probable. To no less an extent, high population density. This poses difficulties
it is possible that authoritarian regimes limit A relatively new oil exporter, in early 2020, Ghana for strategies to combat COVID-19. Its enormous
information about infection rates and deaths. produced a little over 192,000 barrels a day. Its oil industry, located in southern Nigeria, is vital
Fears were that COVID-19 cases in Africa could 2020 budget forecast a $62.60 a barrel benchmark as a source of foreign revenues. With a capacity
exceed the caseloads that had upended public price, however, the crash in oil prices that followed to export 3 million barrels a day, Nigeria is
health elsewhere. Especially alarmed were lea- the outbreak of COVID-19 left generated a budget Africa’s leading oil exporter. Still, the Nigerian
ders in countries with high population density like deficit. However, Ghana has a diversified economy; economy endured bank crises in 2008-2009 as a
Nigeria and South Africa, the continent’s two lar- agriculture (cocoa), manufacturing, mining, and consequence of fraudulent borrowing; banks held
gest economies. services protect it from the most negative effects substantial portfolios of non-performing loans.
In the spring 2020, exports decreased from of oil price volatility. These conditions buffeted the national economy.
Africa as international demand dropped. The country’s gold mining operations are Only the steady income from oil exports,
Although most of the larger exporters benefitted critical; Ghana is Africa’s second leading producer approximately 10% of GDP and 85% of export
from years of high growth, smaller producers like of gold. McKinsey reports that unlike petroleum, revenues, allowed the Federal Government to
Gabon, Equatorial Guinea, Congo, and Chad were prices for gold have increased 28% from January finance its budget and prevent a collapse.
far more vulnerable. Alongside the decline in oil 1, 2020 to August 14. Even if gold prices decline in In its 2020 budget, the Nigerian government
prices was an unraveling of OPEC+ Agreements. 2020, it remains a critical source of wealth that will initially set a benchmark of $57.00 per barrel and
Saudi Arabia and Russia engaged in a price war buffer the worst effects of COVID-19. In Ghana, the 2.18 million barrels a day. However, collapsing oil
and increased oil production; a glut followed coronavirus has thus far infected 45,434, of whom prices compelled a reduction in the benchmark
when supply outstripped international demand. 286 have died, and 44,342 have recovered. The price to $30.00 a barrel while keeping production
In Angola, Ghana, and Nigeria, three governments country, unlike Angola and Nigeria, is a democracy constant. Reduced income has compelled the
that set production rates and a benchmark price that has hosted multiple elections and alternations government to reduce budgetary allocations to
per barrel to fund their budgets, a decline in the of parties in government. In the post-COVID the states and local governments thus forcing
international benchmarks bode risky implications. Ghana, a strong recovery is most probable. them to pay their recurrent expenditures with

68 | AFRICAN POWER Mining & Oil Review Vol33 Issue 34 2021