Soaring oil bills put pressure on Africa’s fragile economies

When prices rise, it is the poor who suffer most. This year’s surge in the oil price towards $100 a barrel has been no exception: it is a concern for rich countries but its greatest threat is to the poorest.

The oil shocks of the 1970s were one of the roots of the developing-country debt crisis of the 1980s. Fatih Birol, chief economist of the International Energy Agency, argues that as soaring oil import bills put pressure on fragile economies, there is a danger the pattern will be repeated.
He calculates that the additional cost of oil imports for his sample of 13 countries since 2004 is $10.6bn: equal to 3 per cent of their gross domestic product over that period. “It is a worrying trend,” he said.

The weakness of the infrastructure of many African countries makes them particularly vulnerable. Fragile electricity grids make diesel-powered generators an important source of supply, and high fuel costs have caused power cuts. The need to transport food over long distances in trucks means that expensive oil also pushes up the cost of food. There have been frequent protests over fuel prices.

The threat is reinforced by the rising price of food. More than 30 of the countries defined as low-income net food importers by the UN Food and Agriculture Organisation also import all or almost all their fuel.

Shamsuddeen Usman, Nigeria’s finance minister, told the Financial Times last month he was concerned that African countries without oil were finding it harder to spend money on health, education and poverty reduction. “Their chances of meeting their Millennium Development Goals targets are slipping back,” he warned.

Financial Times