Global Oil Forecast: Implications for Africa

Global oil prices are expected to remain low throughout 2016 even as the price of the commodity hits an 11-year low.

The struggling Chinese economy coupled with the drop in demand, according to oil analysts, are to blame for the decline in oil prices.

Deputy Executive Director of Ghana-based energy think tank, Africa Centre for Energy Policy, Benjamin Boakye, said the recent development has implications for Africa, where some countries produce oil.

Countries such as Nigeria, Angola and Ghana which started commercial production of oil some 5 years ago may have to revise their budget as well as cut back on social expenditure, Mr. Boakye said.

He believes African countries will feel the brunt of the decline in oil prices more because the governments of oil-producing nations on the continent have overly relied on revenue from crude oil export. This therefore means there will be no revenue available for such countries which have also failed to diversify their economies.

Benjamin Boakye said it was high time African governments began to rethink how to manage their economies. He suggested oil producing countries began boosting trade and manufacturing “so that when there is no revenue, you can get from the other sectors” and ensure they invest oil revenue in other sectors of the economy.

He also proposed the saving of revenue accruing from natural resources which will serve as a buffer for development.

For non-oil producing countries, however, Mr. Boakye said the decline in oil price presents a perfect opportunity for them to also boost other sectors of their economy such as services and production.

The deputy director of the energy think tank however does not expect to see an immediate rise in oil prices unless something dramatic happens in China or on the global stage.

But with Iran and Saudi Arabia looking to increase their production of oil, Mr. Boakye believes the price will continue to hover between $30 and $40.