African economic growth threatened as oil prices surge

As oil prices remain high amid the ongoing war in the Middle East, its impact is increasingly filtering down into the lives of people across Africa.

Oil prices shot past $100 per barrel this week as shipping through the vital Strait of Hormuz came to an effective standstill, and Iran has struck energy facilities in the Gulf.

A top African energy regulator says that if fuel shortages and the current price persists, it could knock three percentage points off economic growth across the continent.

"There is a little bit of panic," said Geoffrey Aori, CEO of the Regional Association of Energy Regulators for Eastern and Southern Africa.

The African Development Bank, a regional development bank, forecast last November that Africa's economy would expand by 4.3 per cent in 2026.

In Nigeria, despite the fact that it produces oil, petrol prices have surged in recent days.

Tricycle rider, Rasheed Ayinla, showed an AFP journalist a small plastic container holding petrol saying it has gone up from ₦200 to ₦600 in a couple of days.

"I do not understand the point of the war,” he said angrily.

“We are not involved, yet we are the ones suffering from its effects. I mean, look at the distance. It is the people in Iran and the United States who are fighting a war, yet we are suffering the consequences."

The rising oil price has a knock-on effect, triggering widespread economic consequences, including higher inflation.

It impacts everything from freight and produce transport costs, the operation of factories and businesses, right down to the cost of food.

The combined effect is increased pressure on the disposable income of households.

A shopper at a market in Nigeria, Dolapo Sanusi, suggested anyone with some spare cash should go out and stock their homes with essential items.

"We do not know where the price hike is heading. Items are getting more expensive. Take for instance, two days ago items were being sold at normal prices, but now they are more expensive. If you have money, please buy essentials," she said.

Time is also running out. Most African countries have fuel reserves for just 15 to 25 days, compared to the International Energy Agency standard of 90 days.

Aori cited the example of his home country, Kenya, which has 20 days of reserve capacity.

Its government has promised there is enough fuel to last until the end of April, but Aori said that was only possible with rationing and a ban on exports to neighbouring countries.

"A new shipment must arrive within 30 days from today," he said.

African governments must mitigate the impact with immediate fuel rationing, and subsidies to cushion the blow of inflation and weakening currencies, though that was not sustainable beyond a few weeks, he added.

The war should serve as a "wake-up call" for the continent, he added, calling for investment in alternative energy sources such as hydrogen and methanol, and more use of electric vehicles.

"We are over-reliant on oil and these wars are not ending soon."

There have been attempts to build more refineries in Africa, and expand reserves, but infrastructure costs run into the billions of dollars at a time when countries have many competing demands and heavy debt burdens.

Meanwhile, the war continues for the 16th day with the United States, Israel, and Iran continuing their strikes across the region.