Africa’s failure to deal with the effects of oil price volatility, particularly for long periods of time, could negatively affect its developmental efforts, the Africa Centre for Energy Policy (ACEP) has warned.
Mohammed Amin Adam, Executive Director of ACEP, who gave the warning at the opening of the Africa Oil Governance Summit 2016 in Accra, said the coincidence between the current oil price crisis and the launch of the Sustainable Development Goals (SDGs) should compel the continent to prepare for difficult times in its development planning.
“It simply illustrates the difficulties ahead of our countries, especially in Africa as a result of our failure to save booming resource revenues for today.
“Our effort will be further undermined by the growing size of illicit financial outflows from our continent, estimated to be more than US$50 billion annually, of which more than 70% flows from oil, gas and mineral economies.”
Lack of proper oil resource use
History has shown that in spite of the oil and mineral price boom of the last decade, most of the African countries, including many oil producing countries, have failed to achieve the Millennium Development Goals (MDGs).
Mr Adam said the last two years have seen many oil producing countries suffer under the heavy weight of declining revenues as a result of the oil price shock, adding that African producers have been the worst hit by such development due largely to their less diversified economies, over-dependence on oil revenues, lower tax effort, fiscal indiscipline and corruption, among others.
“In spite of the lower benchmark prices of crude oil used by most of these countries in their national budgets, they have been compelled to make difficult fiscal adjustments which are not only unpopular with their people, but also affect their macroeconomic outlook.”
Benjamin Dagadu, Deputy Minister for Petroleum, in an address, said the current low oil prices present a lot of problems, some of which include difficulty in attracting investors in deep and ultra-deep water environment for exploration.
He also said Ghana, like other affected victims, face the possibility of the cancellation or deferment of major capital intensive projects as a result of the review of projects.
There is also the difficulty in implementing local content policy and programmes since the projects must be delivered in the most efficient manner, he added.