African oil exporters underperforming regional peers: IMF

Sub-Saharan Africa’s oil exporters are growing their economies at half the rate of the rest of the continent due to a lack of diversification, insecurity and underinvestment, the International Monetary Fund said Oct. 25.

In its regional economic outlook for sub-Saharan Africa, the institution said the region as a whole will grow by 3.6% this year, and 4.2% in 2025.

Yet while diversified economies such as Senegal, Rwanda and Kenya will beat the regional average for economic growth, commodity-dependent nations are expected to fare far worse, with macroeconomic imbalances and financing issues leading to growth of 2.8% in 2024 and 3.2% in 2025.

“Resource-intensive countries continue to grow at about half the rate of the rest of the region, with oil exporters struggling the most,” the IMF said in its report. “Structural weaknesses in the business environment and governance have hampered their efforts to diversify following the post-2015 decline in commodity prices.”

Such countries have also seen growth dampened by insecurity, conflict, electricity shortages and the fact that “both domestic and external financing conditions continue to be tight, with many countries unable to access or afford financing.”

Nigeria, Africa’s biggest oil producer at 1.46 million b/d according to the Platts OPEC Survey from S&P Global Commodity Insights, will expand its economy by just 2.9% in 2024 and 3.2% next year, the IMF said. The country has seen oil production fall amid insufficient investment and exploration activity in recent years, as well as insecurity in its oil-rich Niger Delta.

Economic growth this year will also be “subdued” in oil exporters Angola (2.4%), Republic of Congo (2.8%), Gabon (3.1%) and Ghana (3.1%) the report said.

South Sudan -- whose fragile economy relies almost entirely on oil revenues from exports through war-torn Sudan – experienced a huge economic shock in February when its sole export pipeline ruptured, cutting crude output from 150,000 b/d to just 40,000 b/d, according to the Platts Survey. With the pipeline still offline, the country will see its economy contract 26.4% in 2024, the IMF said, although it should recover next year.

South Sudanese officials have raised hopes that the pipeline -- which could not quickly be fixed due to the fighting in Sudan -- will come back online within weeks.

The IMF report notes that inflation has remained higher in Africa’s oil exporters than its regional peers, while they have also suffered from volatile commodity prices and slowing economic activity in the world’s leading crude importer, China. Angola, Nigeria, the Republic of Congo and South Sudan all rely on Asian demand for their key crude grades.

Conflict, including in Sudan, impacts regional stability and threatens to disrupt trade, while investment is challenged by high borrowing costs, the IMF said. African oil exporters are also threatened by the global transition to greener fuels.

Among its recommendations, the IMF suggests economic diversification reforms to improve the region’s business climate, as well as increased infrastructure investment.