Coronavirus: how oil price war will hurt African producers
- Angola faces one of the biggest hits in Africa from dropping oil prices, exacerbating its already severe economic woes
- Other African oil exporters such as Congo-Brazzaville and Nigeria that sell crude to China are also suffering from reduced volumes as demand falters
Africa’s second-largest oil exporter Angola faces taking a major economic hit from an oil price war fuelled by the coronavirus that has seen the largest drop in crude oil prices since the Gulf War in 1991.
Oil accounts for two-thirds of Angola’s tax revenue and 95 per cent of its exports, according to 2017 figures from the International Monetary Fund.
In 2017, Angola sold 67 per cent of its crude to China worth US$18 billion, according to data compiled by the Massachusetts Institute of Technology. The southern Africa nation has also signed resource-backed loans with Chinese lenders with repayment collateralised by income from the country’s oil. With lower oil prices, the country will be forced to pump more to repay the loans owed to China and other foreign financiers.
Analysts at London-based consultancy Capital Economics expect that Angola will suffer the largest coronavirus-related shock of all African economies and said the impact of lower oil export revenues on the country’s economy had the potential to exacerbate its already severe economic woes.
State-owned oil firm Sonangol had already been forced to resell a shipment at a discount after Chinese importers cancelled purchases due to port closures, Capital Economics said.